Social Capital as a Resource for Migrant Entrepreneurship: Self-Employed Migrants from the Former Soviet Union in Germany 3658291400, 9783658291402

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Elena Sommer

Social Capital as a Resource for Migrant Entrepreneurship Self-Employed Migrants from the Former Soviet Union in Germany

Social Capital as a Resource for Migrant Entrepreneurship

Elena Sommer

Social Capital as a Resource for Migrant Entrepreneurship Self-Employed Migrants from the Former Soviet Union in Germany

Elena Sommer Max-Planck-Institut für Sozialrecht und Sozialpolitik München, Germany Dissertation Universität Bremen, 2018 u.d.T.: Elena Sommer: „Social capital as a resource for migrant entrepreneurship: A qualitative study of self-employed migrants from the former Soviet Union in Germany“.

ISBN 978-3-658-29140-2 ISBN 978-3-658-29141-9  (eBook) https://doi.org/10.1007/978-3-658-29141-9 © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer VS imprint is published by the registered company Springer Fachmedien Wiesbaden GmbH part of Springer Nature. The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany

Acknowledgements First of all, I would like to thank all the respondents who agreed to participate in my research. This study would not be possible without their trust and effort. This study is the result of my PhD fellowship at Bremen International Graduate School of Social Sciences (BIGSSS). I am grateful for having had an opportunity to be part of BIGSSS and to benefit from the seminars and discussions with fellow PhD-students and BIGSSS faculty. Further, being a BIGSSS PhD fellow provided me with an opportunity to advance my knowledge through participation in summer school programs and conferences as well as a chance to present my own work. I would like to thank my PhD supervisors Prof. Dr. Michael Windzio (University of Bremen) and PD. Dr. Markus Gamper (University of Cologne) for their valuable scientific advice, their support, and their patience. Further, I am grateful for the financial support from Hans-BöcklerStiftung and Kölner Gymnasial- und Stiftungsfonds who kindly provided a PhD grant for this research. I would also like to thank Professor Louise Ryan (University of Sheffield) for the inspiration that her work has had on my own research and for the opportunity of a research stay in her team. And of course, I owe a big thank you to my dear family, friends and colleagues who were supportive in different areas of my life while I was working on my PhD. Elena Sommer

Content 1 Introduction .............................................................................. 1 2 Theoretical framework ............................................................. 7 2.1 Approaches in migrant entrepreneurship research .................. 7 2.2 Embeddedness, social capital, and social ties....................... 20 2.3 Transnational entrepreneurial activities of migrants .............. 33 2.4 Research questions and conceptual framework .................... 39 3 Migrants from the former Soviet Union in Germany............ 47 3.1 Migration to Germany............................................................ 47 3.2 Social integration .................................................................. 52 3.3 Labour market integration ..................................................... 55 3.4 Self-employment of the former Soviet Union migrants........... 59 4 Study design and methodology ............................................ 65 4.1 Setting of the study and definitory remarks ........................... 65 4.2 Qualitative approach ............................................................. 70 4.3 Sample.................................................................................. 72 4.4 Interviews .............................................................................. 80 4.5 Network maps ....................................................................... 84 4.6 Data Analysis ........................................................................ 89 5 Russian-speaking migrant market ........................................ 93 5.1 Enclave economy in migrant entrepreneurship research ....... 93 5.2 Russian-speaking migrant market in Germany ...................... 98 5.3 FSU migrant market in Düsseldorf and in Waldbröl ............. 102 5.4 Overview of interviewed migrant market businesses ........... 107

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5.5 Types of migrant market businesses ................................... 112 5.6 Motivation to start a business in the migrant market ............ 128 5.7 Social capital as a resource for migrant market ................... 136 5.8 Client acquisition ................................................................. 146 5.9 Business-related relationships ............................................ 153 5.10 Examples of business networks in migrant market ............ 160 5.11 Conclusions ...................................................................... 171 6 Mixed market businesses .................................................... 175 6.1 Overview of interviewed mixed market businesses ............. 177 6.2 Use of social capital in mixed market businesses................ 183 6.3 Moving from migrant market to mixed market...................... 192 6.4 Moving from mainstream market to mixed market ............... 197 6.5 Example of business network in mixed market .................... 200 6.6 Conclusions ........................................................................ 204 7 Mainstream market businesses .......................................... 207 7.1 Overview of interviewed mainstream market businesses .... 209 7.2 Mainstream businesses in low entry barrier sectors ............ 214 7.3 Mainstream businesses in knowledge-intensive sectors ..... 220 7.4 Examples of business networks in mainstream market ....... 224 7.5 Conclusions ........................................................................ 234 8 Transnational entrepreneurial activities (TEA) .................. 237 8.1 Overview of interviewed businesses involved in TEA .......... 239 8.2 Forms of transnational entrepreneurial activities ................. 246 8.3 Motivation for engaging and not engaging in TEA ............... 253 8.4 TEA of temporary returnees ................................................ 256

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8.5 Types of transnational entrepreneurial activities.................. 260 8.6 Examples of business networks involved in TEA................. 274 8.7 Conclusions ........................................................................ 279 9 Conclusions of the study and outlook ............................... 283 References .............................................................................. 291 Appendix A: Interview guide .................................................. 323 Appendix B: Network map data collection instrument ......... 329

1 Introduction Labour market integration is one of the core dimensions of social and economic incorporation of migrants. In the past, labour market integration of migrants primarily meant their integration as employees. Since the 1990s, however, the self-employment rate of migrants in Germany has been constantly increasing. The scope of possible formal economic activities of migrants and the resources at their disposal result from the interplay of different factors. Among other factors, social capital is an important resource for self-employment. The migration process, however, leads to the restructuring of the social capital. Since its starting point in the 1970s, migrant entrepreneurship research has focused on social capital of migrants as a resource for their self-employment. Various studies (e.g. Kloosterman & Rath 2001; Portes & Sensenbrenner 1995; Pütz 2004) have demonstrated that migrant entrepreneurs heavily rely on social capital in their migrant community to compensate for shortcomings of other capitals (e.g. financial and human capital), especially in the early phases of their self-employment. Although ethnic resources are particularly relevant for ‘getting by’ in the start-up phase of business, in the long-term perspective ethnically mixed social networks foster business growth, enabling ‘getting ahead’ (Sequeira & Rasheed 2006). Many migrants start their businesses serving their own migrant community. Social ties outside the migrant community are particularly relevant for ‘breaking out’ to a broader market (Engelen 2001). Although migrant entrepreneurship research has consistently emphasised the role of social capital for migrant businesses, until now little is known about how migrants get access to business-related social capital in the receiving country. On the one hand, the access © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 E. Sommer, Social Capital as a Resource for Migrant Entrepreneurship, https://doi.org/10.1007/978-3-658-29141-9_1

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to different networks can influence migrants’ self-employment strategies. On the other hand, migrants can develop strategies to enable access to the particular networks that are beneficial for the development of their business. Further, the use and function of social capital from different networks for migrant business can depend on the market strategy chosen by entrepreneurs. Therefore, as suggested by Kloosterman (2010), migrant entrepreneurship research can benefit from differentiation between different markets where migrants operate their businesses. In addition, both entrepreneurship and social capital are dynamic concepts. Business strategy and social networks of migrants can change over time and can mutually influence each other. Studies of migrant businesses, however, rarely look at social capital of self-employed migrants from a dynamic perspective. In order to partially fill this gap, this study explores the accessibility and use of social capital within and outside the migrant community for migrant businesses operating in different markets (migrant market, mixed market, mainstream market) over time. The following central research questions are at the core of this study: 

  

What type of social capital is used by self-employed migrants for their entrepreneurial activities depending on the market strategy? How are the business-related social ties accessed? How do business-related social relationships and economic activities (co-)evolve over time? What kind of social capital is used when migrant entrepreneurs get involved in transnational economic activities?

An analysis of social capital of migrant entrepreneurs could benefit from incorporating theoretical concepts from sociology, in particular from social capital research, as well as from migration and entrepreneurship research. Therefore, this study uses insights from these

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different fields. The theoretical framework of the study focuses particularly on the concepts of Mixed Embeddedness (Kloostermann & Rath 2001) and Social Capital (e.g. Bourdieu 1986; Coleman 1988; Portes 1995; Lin 2001) and integrates further relevant concepts dealing with the nature of social ties from migration and entrepreneurship research (e.g. Portes 1995; Ryan 2011; Uzzi 1997). Further, the study extends the mixed embeddedness model through transnational perspective and explores the nature and function of social ties involved in different types of transnational economic activities of migrants. Given the explorative character of this study as well as the nature of central research questions aiming at studying the content, accessibility, and dynamics of social capital, a qualitative approach was chosen for this study as it is particularly suited for studying the complexity of social capital in general and these three aspects of social capital in particular (Hollstein 2011). This study is based on the content analysis of 62 semi-structured interviews with self-employed migrants from the former Soviet Union (FSU) in an urban and a rural area in Germany. With about 2.6 million people who arrived in Germany from the successor countries of the former Soviet Union since the 1990s, FSU migrants belong to one of the largest migrant groups in Germany. Compared to guest worker migrant groups from Turkey, Italy, and Greece, FSU migrants comprise a relatively new group with regard to their stay duration in Germany. Due to their ethnic background, most FSU migrants have a privileged legal status, which is reflected in their access to German citizenship and inclusion into the German welfare system. At the same time, FSU migrants have a relatively low self-employment rate (Leicht et al. 2005). This can be partly interpreted by the fact that FSU migrants are relatively well integrated in the German labour market compared to other migrant groups (e.g. Worbs et al. 2013), and there is less self-employment due to

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problematic access to the formal labour market among FSU migrants (Leicht et al. 2005a). Until now only a few studies look at the self-employment of FSU migrants (Kapphan 1997; Leicht et al. 2005a; Sommer 2011). Although there are some similarities of FSU migrant businesses with archetypical migrant businesses described in migrant entrepreneurship literature, there are also some essential differences. Existing studies, for example, show that FSU migrants mainly operate on the local market in Germany, contrary to other migrant groups with no particular spatial or branch-specific concentration. They run their businesses in diverse sectors and different market segments and, therefore, this group is particularly suitable to study social capital of migrant businesses operating in different market segments. Another distinctive characteristic of FSU migrants is their residential preference for rural areas (Wenzel 1999). Local structural context has an impact on social integration of migrants in general and on the development potential of migrant businesses in particular (Rekers & Kempen 2000). The vast majority of studies dealing with migrant businesses have been conducted in urban areas which is related to the circumstance that migrants usually live in urban areas. Comparing self-employment of migrants from the same country of origin in rural and urban areas can provide valuable insight on how the local structural context can influence migrant entrepreneurship in general and access to business-related social capital in particular. The study is structured as follows: After a short general Introduction, Chapter 2 presents the main theoretical concepts and empirical findings in the research field of migrant entrepreneurship, social capital, and migration studies that are relevant for the analysis of the network characteristics of migrant

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entrepreneurs. The chapter concludes with an overview of research questions and the conceptual framework developed for this study. Chapter 3 provides a brief overview of the migration process of FSU migrants to Germany followed by an overview of empirical findings about their social and labour market integration in Germany. The last subsection demonstrates the findings from available studies on self-employment among FSU migrants. Chapter 4 describes the study design, the sample, and applied methodology. It starts with a clarification of the definitions used in the study design followed by a justification for the study’s selected setting and rationale for the utilisation of a qualitative approach. Description of data collection procedures and information about the data analysis techniques applied in the study conclude this chapter. Chapter 5 deals with economic activities of FSU migrants that can be broadly classified as migrant market businesses with predominantly co-ethnic clientele. It starts with the concept of enclave economy developed in the early migrant entrepreneurship research followed by an outline of main features of the Russian-speaking migrant market in Düsseldorf and Waldbröl. The chapter presents data-driven classification of migrant market businesses in four categories, with the main characteristics of their offerings, clientele, and business-related social ties emphasised. Further, motivations to start a business in the migrant market, client recruitment strategies, and common attributes and functions of social capital in this specific market segment are discussed. Two examples of migrant market business networks conclude the chapter. Chapter 6 illustrates how social capital is used by businesses operating in the mixed market and simultaneously targeting at co-ethnic and general population clientele. It first demonstrates strategies of getting access to native clients applied by migrant businesses that

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started their business in the migrant market in order to enable a ‘break out’ to a broader market. It is followed by a section focusing on businesses that initially started their work in the mainstream market but moved to the mixed market after identifying economic advantages arising from targeting at co-ethnics as an additional client group. An illustrative example of an entrepreneurial network in the mixed market concludes the chapter. Chapter 7 demonstrates what type of social capital is used by businesses operating in the mainstream market with predominantly general population clientele. The chapter illustrates that the access and use of social capital by businesses operating in the mainstream market differs between businesses in low-entry barrier sectors as compared to businesses providing knowledge-intensive services in high-skilled sectors. The main characteristics of social capital used by the self-employed in these two segments of the mainstream market are outlined followed by two illustrative examples of business network maps in the mainstream market. Chapter 8 explores the kinds of social capital FSU migrants use when they get involved in different types of transnational entrepreneurial activities. First, the forms of transnational economic activities found in empirical data are described followed by presentation of motivations for getting involved, or not getting involved, in transnational economic activities. Then the chapter focuses on the empirically derived types of transnational entrepreneurial activities and their main characteristics with regard to social capital. An illustrative case example concludes the chapter. Chapter 9 summarises the findings and shortcomings of the study and presents some suggestions for future research.

2 Theoretical framework This chapter provides an introduction to the concepts that are relevant for this study and builds its theoretical framework. It starts with a brief overview of the development of migration entrepreneurship research and the prominent explanatory approaches. Then, the concepts of embeddedness and social capital are introduced and discussed in relation to migrant entrepreneurship. The subsection following that, provides an overview of conceptual and empirical findings on transnational entrepreneurial activities. The chapter concludes with an overview of research questions and the conceptual framework developed for this study.

2.1 Approaches in migrant entrepreneurship research Migrant entrepreneurship research, often labelled as ‘ethnic entrepreneurship’, ‘ethnic business’, or ‘ethnic economy’ research originates in the USA. Empirical studies have identified specific features of migrant entrepreneurship that were not common for the mainstream market such as spatial concentration of small businesses (mostly labour intense sectors with low entry barriers) run by persons with similar migration background in particular neighbourhoods; high proportion of co-ethnic clientele and employees; common recruitment of family members; acquisition of business start-up capital in the migrant community or country of origin; reliance on horizontal and vertical networking within the migrant community; high degree of informality; and precarious entrepreneurial existence reflected in high failure rates and low profitability (Engelen 2001; Hillmann 2007; Pütz 2004; Zhou 2004).

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 E. Sommer, Social Capital as a Resource for Migrant Entrepreneurship, https://doi.org/10.1007/978-3-658-29141-9_2

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The starting point of these pioneer studies in the 1970s was the observation that self-employment rates strongly varied among different ethnic groups despite similar structural conditions in the host country (Bonacich 1973; Light 1972). Early research focused on ethnocultural characteristics of self-employed migrants (Rath & Kloosterman 2000). Amongst prominent pioneering approaches of migrant business is the middleman minority approach developed by Bonacich (1973). This approach deals with the so-called sojourners, who historically were temporary migrants arriving in a foreign country to quickly earn financial capital that they would take back to their country of origin or reinvest elsewhere. Sojourners studied by Bonacich (1973) were mostly self-employed in trade or economic sectors with low entry barriers that did not require much start-up capital and social ties in the host society, and where they were able to gain quick monetary profits through intense labour. As described by Barrett et al. (1996): ‘Having little or no interest in social life, consumerism or any other form of wasteful diversionary self expression, the sojourner represents a particularly dedicated form of entrepreneur, ideally adapted to thrive in the most competitive and labourintensive sectors of economy’ (Barrett et al. 1996: 789). Sojourners, being future-oriented with plans of return to the country of origin, are usually not interested in integrating into the host society and show preference for intra-ethnic marriage, local self-segregation, and strong bonding within their ethnic community. However, through their entrepreneurial activity they gain intermediate rather than lowstatus positions in the host society becoming middlemen between producers and consumers, employees and employers, property owners and tenants, and migrant minority and natives (Bonacich 1973). The middleman minority approach in its traditional view has been criticised for its strong emphasis on migrants’ intentions to return. The approach is applicable for analysing ethnic entrepreneurship in pre-capitalist societies as it mainly focuses on the minority-majority

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relationship (Kim 1999), for example economic activities of Chinese in Southeast Asia, Indians in East Africa, or Jewish diamond traders in Europe and the United States (Bonacich 1973). As the approach was developed for a very specific type of migration, its application in studies of contemporary migrant entrepreneurship is limited due to the increasing diversity of migration forms in the contemporary globalised world. The middleman minority approach also ignores the legal regulations that restrict the option of self-employment for temporary migrants, especially in European countries. Further criticism is related to its emphasis on cultural attributes such as the assumed predisposition of certain ethnic groups to specific economic sectors and industries. Despite this criticism, the main idea of the middleman minority approach that self-employed migrants can take intermediary position in the host country society has been frequently adapted in empirical studies of migrant entrepreneurship. The middleman market (Engelen 2001) emerges when migrants start selling their products and services to the wider public outside their own migrant community. By engaging in economic activities with out-group members these entrepreneurs take an intermediary position between different population groups (Waldinger 2000). The earlier approaches in migrant entrepreneurship studies have often been criticised for culturalistic assumptions that some ethnic groups are more inclined to self-employment than other ethnic groups due to their cultural traits and for overemphasising cultural aspects of migrant businesses (e.g. Rath & Kloosterman 2000, Timm 2000; Waldinger et at. 1990). By analysing the relationship between cultural aspects and economic action, Pütz (2004, 2008) builds upon criticism of essentialist understanding of culture as a homogeneous, territory-localised unit in migrant entrepreneurship research. Pütz (2004, 2008) goes back to concept of transculturality developed by Welsch (1992) that ‘implies annihilation of congruity of territory and culture’ (Pütz 2008: 524) and relocates cultural boundaries from inter-personal tier to intra-personal tier disposing

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different cultural reference systems. According to Pütz (2008: 524): ‘Through the relocation of the inside-outside-difference to an intrapersonal tier, multiple belonging of individuals is conceptually accepted as well as empirically seizable’. Individuals place themselves into different interpretive schemes depending on the action they are performing. The differentiation between ‘inside’ (familiar) and ‘outside’ (unfamiliar) is reflected in everyday transculturalism and strategic transculturalism. Routine actions are associated with everyday transculturalism that, for example, enables business partners to ‘attain the same conceivability of meaning in a situation of economic interaction’ (Pütz 2008: 525). According to Pütz (2004, 2008) everyday transculturalism can transform in strategic transculturalism ‘if these schemes are reflexively accessible to the actor, and therefore deliberately applicable as an ability to operate and orientate oneself reflexively in different symbolic structures’ (Pütz 2008: 525). Thus, cultural interpretative schemes can consist of multiple options of action that can be reflexively accessed by individuals and strategically applied in the entrepreneurial context by correctly assessing the ‘others’ and identifying economic opportunities (Pütz 2004, 2008). In the early studies of migrant entrepreneurship, the economic activities of ethnic groups were also explained by an ethnic group’s ability to activate ethnic resources that help reduce transaction costs. Resources-oriented approaches focus on the supply side of entrepreneurship, emphasising resources (economic, cultural, human, and social capital) as the main factor for self-employment. In particular, they stress the importance of non-economic resources for migrant entrepreneurship. As migrants are often disadvantaged in terms of their human and economic capital when compared with natives, especially in the early stages of business formation, they rely on their ethnic social capital to compensate for shortcomings of other types of capital, especially financial capital (Panayiotopoulos 2006; Portes and Sensenbrenner 1993). There are ambiguities an

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partly contradicting definitions of what is understood as ‘ethnic’ in ethnic entrepreneurship research (Pecaud 2010). In this study, the definition of Waldinger et al. (1990), defining ‘ethnic’ as ‘a set of connections and regular pattern of interaction among people sharing common national background or migration experience’ Waldinger et al. (1990: 30) is applied. Following Min & Bozorgmehr (2000), ethnic resources include community-based resources such as access to information and private loans within the migrant community, the opportunity to purchase businesses from co-ethnics (people sharing same migration background or ethnicity), loyalty from co-ethnic employees, business partners and clientele, as opposed to personal resources such as education, language skills, personal savings and pre-migration self-employment experience (Min & Bozorgmehr 2000). The access to ethnic resources is often associated with ethnic solidarity, which is based on the expected norm of mutual support between members of the same migrant community due to cultural similarity and difficulties accessing formal support systems (Faist 2000a; Portes 1987). Ethnic solidarity rooted in group membership in the ethnic community is treated as a valuable resource for selfemployment providing migrant businesses with economic advantages (Logan et al. 1994). Ethnic solidarity is characterised by symbolic bonds between members of the same migrant community based on shared interpretive patterns (e.g. culture-specific values, shared language and background, minority status) that build a reference frame for the group (Faist 2000a). It is expressed in loyalty and mutual trust among group members and the willingness of migrants to provide assistance to other fellow migrants whereby cooperation is put above individual interests and profit maximisation (Barret et al. 1996). In this context ethnicity is defined as identification with persons from the same ethnic group expressed in ‘enhanced social solidarity attendant upon cultural minority status’

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(Light 1984: 199). Light (1984) differentiates between orthodox ethnicity (cultural attributes and resources brought from country of origin) and reactive ethnicity that migrants develop in the host country as a reaction to their minority status. Collective ethnic resources provide entrepreneurs with access to start-up capital (e.g. rotating credit system of Asian entrepreneurs in the USA), staff recruitment, and client acquisition (Pütz 2004). Migrant entrepreneurship research also emphasises the important role of family in providing migrant businesses with start-up capital, practical help and unpaid labour (Sander & Nee 1996; Sequeira & Rasheed 2006). Family and kin support is seen as focused solidarity (solidarity within small groups with strong ties) whereas diffused solidarity (solidarity towards people with similar background in general) is related to support from migrant community beyond family and kin social circle (Faist 2000a). The resources-oriented perspective of migrant entrepreneurship has been criticised for over-emphasising the ethnic aspect, especially in the form of orthodox ethnicity as ‘ethnicity is anything but fixed or taken for granted’ (Kloosterman & Rath 2010: 103). Moreover, ethnic resources are not an inherent feature of all migrant communities but rather a consequence of disadvantaged minority status expressed in developed group consciousness characterised by bounded solidarity and enforceable trust that is ‘conditioned by the extent to which the community is the sole or principle source of reward’ (Portes & Sensenbrenner 1993: 1336). Ethnic solidarity emerging in the form of reactive ethnicity is partly an economic strategy (Leicht et al. 2005b). Tolciu (2011), studying Turkish migrants in Germany, criticises the assumption of natural ethnic solidarity and the common perception of ‘ethnically over-socialised’ migrant entrepreneurs in migrant entrepreneurship research that neglects the role of economic incentives in individual behaviour. Tolciu (2011) adopts the concept of bounded rationality put forth by Simon (1993) where

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entrepreneurial outcomes are a matter of optimisation under constraints. Unable to achieve optimal rationality due to external (e.g. institutional context) and internal (e.g. limited access to mainstream business networks and financial resources) constraints, migrants choose a satisfactory alternative instead. They use social capital from their migrant community not necessarily because of their ethnic identification or ethnic solidarity but rather because they understand their ethnic social capital as a strategic, economic resource for action. In addition, it is questionable that ethnic resources are available to all members of a migrant community to the same extent (Franzen & Pointer 2007; Sanders & Nee 1987). Overstressing the role of ethnic resources leaves out notion of class, gender, and generational differences in the conceptual framework (Hillmann 1999; Pecaud 2010; Rusinovic 2006; Valdez 2016). Further, several studies demonstrate that ethnic resources facilitate business creation among migrant populations, but excessive reliance on ethnic social capital can result in a mobility trap and lead to isolation from the mainstream economy (Bates 1994; Goebel & Pries 2006; Gold 1994; Kanas et al. 2009; Kim 1999; Nee et al. 1994). According to these studies, ethnically mixed social networks are beneficial for the long-term development of migrants' business enabling self-employed migrants to widen their clientele circle by attracting the host population and moving towards the mainstream market. Further, a growing number of empirical studies demonstrate that apart from ethnic resources, human capital and class background also have an impact on the likelihood of self-employment and economic success of migrants (Bates 1994; Nee & Sanders 2001; Portes & Bach 1985; Portes & Rumbaut 2001; Valdez 2008; Zhou 1992). As ethnic resources alone cannot explain migrant entrepreneurship, an opportunity-related perspective was added to the research field

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(Model 1993; Portes & Rumbaut 1990; Waldinger 1994). Opportunity-oriented approaches focus on the structural framework (e.g. legal and economic environment) and market conditions (e.g. ethnic division of the labour market and availability of free niches) that exist in the host country at a certain point and foster or limit self-employment among migrants (Aldrich & Waldinger 1990). Structural framework can vary for different migrant groups in the same country of destination, for example, depending on migrants’ legal migration status and attitudes of the host population towards different ethnic groups. Opportunity-oriented approaches emphasise the disadvantaged position of migrants in the mainstream labour market due to language difficulties, lack of host-country work experience, and the difficult formal recognition of qualifications attained in the country of origin. Proponents of the ‘disadvantage theory’ explain increasing self-employment amongst migrants as a reaction to discrimination in the mainstream labour market whereby the ethnic economy is seen as an alternative protected market providing fellow migrants with jobs. The ethnic economy can have different forms and can target different clientele groups. According to Zhou & Cho (2010: 86): The ethnic economy is an umbrella concept that takes into consideration every enterprise that is either owned, supervised, or staffed by racial/ethnic minority group members regardless of size, type, and locational clustering, as well as access to enterprises in the mainstream economy by ethnic networks. Opportunity-oriented approaches focus on niche markets that are occupied by migrants. The presence of a greater number of migrants sharing the same background facilitates the formation of market niches for products and services that were previously not offered in the mainstream market. Ethnic niches usually cover migrants’ demand for ethnically associated goods (e.g. special food, books, clothes) and services (e.g. cultural education for migrant children, funeral services, wedding ceremonies) as well as services in the

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migrants’ native language that are generally offered by the mainstream economy (e.g. travel agencies, tax and law consultations, care of the elderly and sick). The competitive advantage of these services in relation to similar services offered in the mainstream market is not only the language but also perceived trust based on informal personal relationships between customers, business owners, and employees (Waldinger et al. 1990). Furthermore, the niches in the mainstream economy with ethnic occupational concentration (business staffed by migrants from the same migrant group) that are oriented towards clientele from different ethnic groups including natives are considered to be part of ethnic niching (Waldinger 1996). These niches are mostly labour intense sectors in stagnating or shrinking markets with a low entrance barrier and high competition within the niches that are left by native entrepreneurs due to low economic profits that can be gained from them (Model 1997; Rath 2001; Waldinger 1996). Self-employment in such niches is a mixed blessing. On the one hand, markets with lower entrance barriers facilitate business start-ups among migrants with limited resources. On the other hand, they attract many migrant entrepreneurs and the saturation point is reached relatively quickly resulting in cutthroat competition (Kloosterman 2010). Businesses that are part of an ethnic niche and are mainly oriented towards clientele from the same ethnic group — usually referred to as ethnic enclaves — are protected from competition from mainstream businesses, but their economic growth is limited and dependent on the purchasing power of fellow migrants who are usually economically disadvantaged compared to natives (Kloostermann 2010). While pioneer ethnic businesses might benefit from first mover gains and an established reputation in the migrant community, there usually is competition within the niche as more and more new businesses move in (Pütz 2000). Entrepreneurship in the ethnic niche is often associated with tolerable survival rather than rational maximising of monetary profits (Barett et al. 1996; Ram & Hillin

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1994). An ethnic niche has also a temporarily limited life cycle as it becomes decreasingly attractive to the second generation of migrants (Rusinovic 2006). ‘Breaking out’ from the ethnic niche towards the mainstream market is a way to enable the economic growth of the business (Engelen 2001; Pütz 2000; Ram & Hillin 1994). Waldinger et al. (1990) were the first to combine the opportunityoriented perspective with the resources-oriented perspective in their interactive model of migrant entrepreneurship. According to their model, migrant self-employment results from interaction of individual features and group characteristics (supply side) with the opportunity structure (demand side). The interaction of these two components is essential in explaining migrant-group differences in self-employment rates and entrepreneurship patterns (Valdez 2008). Kloosterman and his colleagues (Kloosterman et al. 1999; Kloosterman and Rath 2001) extended this interactionist approach further by including the institutional perspective that was mostly lacking in the North American approaches (Engelen 2001; Kloosterman et al. 1999; Valdez 2008). They developed the concept of mixed embeddedness that underlines the strong interaction of migrants’ individual and collective resources, opportunity structure, and the institutions operating between them claiming that studies of migrant entrepreneurship should take into account the wider social, economic, and politico-institutional context. Thus, this model analyses migrant selfemployment at the micro-level (resources), meso-level (local structural conditions), and macro-institutional level (Kloosterman 2010). The model explicitly takes into consideration the dynamics of the opportunity structure (e.g. changes in the local economy) and assigns migrant entrepreneurs agency to make their own choices and potential to reshape the structural framework through their economic activities.

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The mixed embeddedness approach emphasises the strict regulatory nature and the high level of institutionalism of the European system. Apart from economic and qualification barriers there are also institutional barriers that determine market entry possibilities for newcomers (Kloosterman & Rath 2001). In some European countries, including Germany, non-citizens face stricter legal regulations with respect to getting a permit to start their own business than citizens (Wilpert 2003). National welfare regimes also have an impact on the opportunity structure by creating or limiting demands for certain markets. For example, demand for privately organised childcare or cleaning services depends on the labour participation of women (Kloosterman 2010). Access to welfare benefits for migrants can also influence the decision of self-employment. In general, the opportunity structure in the mixed embeddedness model with its three main variables — ‘size of the market domain, accessibility of markets, and growth potential of markets’ (Rath & Kloosterman 2002) — describes the structural economic context that influences the possibility of openings for small migrant businesses in the receiving country. Economic changes, such as transition towards post-Fordist and post-industrial societies with their shift towards more flexible and customised ways of production and services, created market opportunities for small businesses that were picked up by the migrant population as well as by natives (Kloosterman 2003). Depending on the research question, the opportunity structure can be conceptualised in various ways. As business opportunities in capitalist societies are ‘intrinsically linked to markets’ (Kloosterman 2010: 28), in his simple model of openings of the opportunity structure, Kloosterman (2010) suggests a way of conceptualising the opportunity structure according to market openings based on two dimensions: the required entry barrier in terms of human capital (low-skilled/high-skilled) and market growth potential (stagnating/expanding). This opening opportunity structure model

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only takes into consideration markets with a low financial entry barrier (where the vast majority of migrant businesses is started), and therefore, the financial capital variable is held constant. Kloosterman (2010) differentiates between vacancy-chain openings (lowskilled and stagnating; e.g. small-scale retail, shoe repair, or clothes alteration services), post-industrial/low-skilled (expanding; e.g. personal services like child care, food delivery) and post-industrial/highskilled (expanding; e.g. IT technologies, design, financial consultancy) markets where migrants can start up their businesses. A combination of a high skill threshold and a stagnating market is assumed to be highly unlikely to attract migrant entrepreneurs and, therefore, is left out of the discussion in Kloosterman’s study. According to Kloosterman (2010), suggested market differentiation allows accounting for new forms of entrepreneurship in a post-industrial economy going beyond businesses traditionally associated with migrant entrepreneurship in the low end of the market (e.g. cheap food restaurants or small scale retail businesses like corner shops). Ethnic markets, primarily serving migrant communities, are treated as a special case of the three types of market openings in the opportunity structure model (Kloosterman 2010: 33). In the next step, Kloosterman (2010) looks at social capital that is prevalent for each of the three opening types in his model. Vacancychain openings often deploy informal practises as a matter of survival because such a market is characterised by cutthroat competition (Kloosterman et al. 1998). Informal practises require strong embeddedness in social networks with high level of trust among its members (Portes 1994). The social capital of migrant business owners in vacancy-chain openings mostly overlaps with ethnic capital (Kloostermann 2010). Strong embeddedness in the migrant community and reliance on ethnic resources result in homogeneous social capital mobilised for economic activities. Breaking out from stagnating or shrinking markets requires weak ties enabling information

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exchange about and access to other markets. In line with Granovetter’s ‘strength of weak ties’ argument (Granovetter 1973), crossgroup ties widen information exchange beyond a redundant circle of strong in-group ties, opening up new economic opportunities. Businesses that operate in post-industrial/low-skilled and post-industrial/high-skilled markets are, in contrast, characterised by heterogeneous social capital that goes beyond the migrant community. Embeddedness in heterogeneous networks, according to Kloosterman (2010), is a pull factor for migrants to start a more rewarding business in terms of social mobility in one of the two aforementioned post-industrial openings. This is the case as heterogeneous social capital fosters information exchange about new consumption preferences in post-industrial urban economies, offering low-skilled migrants new perspectives. The number of self-employed migrants in the high-skilled post-industrial sector has been growing recently due to skill shortages in specific sectors in developed countries and policies favouring labour migration of high-skilled migrants. Apart from embeddedness in heterogeneous social networks in the receiving country, transnational social ties are also common for self-employed migrants in high-skilled post-industrial business (Kloosterman 2010). According to Kloosterman and Rath (2010: 102): The archetypical immigrant entrepreneur running a mom-and-pop store is obviously still there, but nowadays a different type of immigrant entrepreneur is also becoming part of the economic landscape in many advanced urban economies. Much better, on average, educated than their predecessors, these immigrant entrepreneurs are not necessarily confined to the lower segments of markets. Instead they often can get access to attractive, expanding markets and they are, typically, not so much pushed to self-employment as pulled by it.

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The traditional view of migrant entrepreneurship in low-skilled and labour-intense sectors has been questioned by recent studies (Hart & Acs 2011; Kloosterman & Rath 2010; McQuaid et al. 2010; Rusinovich 2006; Saxenian 2002; Zhang et al. 2016). In particular, second-generation migrants and high-skilled migrants recently migrating to Europe and the USA show different patterns of running businesses than those analysed in the established approaches. Studies of migrant entrepreneurship would also benefit from more links to general entrepreneurship research and management studies given that certain characteristics analysed as ethnic strategies (e.g. family involvement) are common features of small businesses regardless of the owner’s nationality (Aliaga-Isla & Rialp 2013; Leicht et al. 2005b). Further, temporal and dynamic dimensions of migrant entrepreneurship, such as life cycle of ethnic niches and breaking out to other markets, should be taken into account (Engelen 2001). According to the convergence hypothesis, over time, migrant entrepreneurs move away from ethnic niches to wider markets and their self-employment shows increasingly similar patterns to those of native entrepreneurs (Desidero & Salt 2010). Further, new approaches should integrate the transnational perspective in migrant business research. As Light (2005, 2008) points out, in the current era of globalisation and advanced progress in communication technologies, migrant entrepreneurs increasingly look for opportunities beyond local and national markets, and research should no longer be limited to national borders of the receiving country.

2.2 Embeddedness, social capital, and social ties In contrast to traditional rational choice utility-based economic models, economic sociology brings the role of social action and social

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relationships for economic actions to the fore, applying sociological perspectives to economic phenomena (Smelser and Swedberg 2005). The term embeddedness goes back to Polanyi (1957), and his urge for inclusion of non-economic aspects in economic science as economic transactions are embedded both in economic (e.g. market, trade) and non-economic (e.g. political, social, religious, family-related) contexts. Granovetter (1985) reintroduced the concept of embeddedness to economic sociology and the field of social networks research as an alternative response to the dilemma of the undersocialised conception of individuals in neoclassical economics. This view was characterised by an understanding of rational and self-interested behaviour as hardly affected by social structure. An oversocialised conception of individuals, exaggerating the influencing power of the social environment on human behaviour, on the other hand, dominated in sociology. Granovetter (1985, 1990) criticises both theoretical extremes for automising the actor and failing to consider the actor’s existing social relations. In the oversocialised conception, automisation of the actor results from treating behavioural patterns as internalised and therefore not affected by social relations (Granovetter 1990). According to Granovetter (1985: 487), ‘actors do not behave or decide as atoms outside a social context, nor do they adhere to a script written for them by the particular intersection of social categories that they happen to occupy’. Granovetter (1990) argues that economic action is embedded in concrete systems of social relations, and it is affected by actors, relations, and the structure of the overall network. This suggests that economic decisions are made in a socio-cultural and emotional context rather than in an exclusively economic context solely regulated by contracts and prices (Ulhoi 2005). Embeddedness implies that there are different types of relations between economic actors — some are purely economic, others are social, and some are a combination of both whereby they can be formal or informal, strong or weak, as well as multiplex (Ulhoi 2005).

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Social structure to some extent determines the scope of economic activities whereby trust and networks foster a reduction of transaction costs (Granovetter 1985; Uzzi 1996). Relational embeddedness refers to personal relations of economic actors with each other (e.g. social relations of entrepreneurs with business partners, suppliers, customers, competitors, and institutions) focusing on content and types of social ties (Granovetter 1990). Structural embeddedness goes beyond direct personal relations referring to the broader network of the actors reflecting configuration and structural parameters of the network (Granovetter 1990). The concept of embeddedness has gained widespread attention in entrepreneurial research in general and migrant entrepreneurship studies in particular (Kloosterman 2010). Related to the notion of the social embeddedness of economic action is the concept of social capital with its various definitions and interpretations that have been widely used in migration research since the 1990s (Evergeti & Zontini 2006; Gamper 2015; Hagan 1998; Haug & Pointer 2007; Portes 1995). Originally developed by Bourdieu (1983) and Coleman (1988), the concept of social capital was introduced to the migrant entrepreneurship research field by Portes and his colleagues (Portes 1995; Portes & Sensenbrenner 1993). According to Portes (1995: 12) social capital is ‘the capacity of individuals to command scarce resources by virtue of their membership in networks or broader social structures’. Portes (1995) sees social capital as a product of embeddedness because social capital is ‘a property of the individual’s set of relationships with others’ (Portes 1995: 561). Coleman (1988) notes that social capital does not belong to an individual but emerges from relations between network members and is thus shaped and constrained by social context and social environment. According to Waldinger (1995: 561) the ‘embeddedness of economic action in ethnic communities generates social capital because the social connections within those communities help re-

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solve the uncertainties involved in economic exchange’. Membership in a community serves as a trust indicator whereby ‘the history of prior exchange with members of an ethnic network provides a baseline against which future behaviour can be assessed’ (Waldinger 1995: 561). Trust is the outcome of social capital over time (Woolcock 2001). According to Bourdieu (1986), social capital refers to resources that can be mobilised to enable access to collective capital, and its strength lies particularly in its convertibility into economic capital. The resource-oriented perspective of social capital, which is applied in this study, explores resources that individuals can activate through their social relationships and by belonging to specific social groups (Haug 2000). Coleman (1988) and Lin (2001) emphasise the functional and purposive nature of social capital. Lin (2001: 29) defines social capital as ‘resources embedded in a social structure which are accessed and/or mobilized in purposive actions’. Thus, in the resource-oriented perspective social capital is not simply the sum of all existing social ties but rather reflects those ties that are actually available and can be accessed and mobilised for certain purposes. The access to resources and the extent to which they can be mobilised, however, depends on network characteristics and the actor’s position in it (Gamper 2015; Lubbers et al. 2010; Portes 1995). A network is defined as ‘the set of social relations or social ties among a set of actors and the actors themselves thus linked’ (Emirbayer & Goodwin 1994: 1448). Network resources can be gained from relations between individuals, between firms/institutions, or between individuals and firms/institutions (Heracleous & Murray 2001). Three main sources of social capital are generally differentiated in migration studies: the migrant community in the country of destination, ties with the host population in the country of destination, and

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transnational ties in the country of origin (Haug & Pointer 2007). Often, migration is accompanied by the loss of social capital in the country of origin and the need to acquire new social contacts in the country of destination. As mentioned by Fischer (1982: 4): ‘In building networks, we are constrained by the pool of people available to us’. Especially in the first post-migration years, migrants often integrate into social networks that include other migrants with similar migration background (e.g. because of language barriers or problematic access to the social network of the native population). Ethnically mixed networks are more common among second-generation migrants than first-generation migrants (Rusinovic 2006). Most empirical studies on migrant entrepreneurship (e.g. Kloosterman & Rath 2001; Portes & Sensenbrenner 1995; Pütz 2004) show that, especially in the early business establishment phase, migrants often rely on resources from dense migrant networks in the receiving country. Resources from the migrant community are mainly used for the acquisition of financial start-up capital, information exchange, recruitment of employees and suppliers, and client acquisition (Rusinovic 2006; Waldinger et al. 1990). Due to migrants’ disadvantaged minority status, resources from a migrant community are frequently used for migrant business formation. Also because of various difficulties accessing formal support systems such as, for example, institutional business support programmes, migrants often rely on resources from their personal communities (Flap et al. 2000; Hernandez-Plaza et al. 2014). Although dense multiplex networks are usually based on trust and solidarity reducing transaction costs, some potential downsides can be counter-productive for further business development as they place high personal obligations on their members with increased social control and prevent their members from accessing broader business networks (Portes & Landolt 1996). On the one hand, social capital is a basis for community solidarity (Coleman 1988) and a source of network-mediated benefits (Portes 1995). On the other

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hand, it is also a source of social control, and reciprocity might exhibit traces of self-interest (Leonard 2004; Portes & Landolt 1996; Waldinger 1995). According to Waldinger (1995: 562): Since relations among co-ethnics are likely to be manysided rather than specialized, community effects go beyond their informational value, engendering codes of conduct and the mechanisms for sanctioning those who violate norms. The trust extended from one member of a community to another is both efficient and efficacious; however it is not available to everyone. Outsiders lack the traits, histories and relational ties conductive to collaboration or trust; on these grounds alone, as Hardin (1993) argues, rational considerations lead insiders towards economic exchanges with their own. Inter-ethnic competition amplifies and alters the motivations towards exclusion. Embeddedness in a community is related to the balance of self-interest and group interest (Fukuyama 1986). Co-ethnic social capital is associated both with benefits and costs and is influenced by norms and expectations of the migrant community. Portes & Sensenbrenner (1993) differentiate between principled and instrumental motivation. Principled motivation refers to an individual’s motivation to act in a certain way based on personal values and believe that this is the right thing to do (Gomez et al. 2015; Torche & Valenzuala 2011). It is associated with values acquired through socialisation and the sense of group belonging as well as with altruism leading to behaviours that ‘benefit others, are voluntary, are intentionally performed, are perceived as the reward itself, and are performed without the expectation of any kind of external compensation or reward’ (Gomez et al. 2015). Bounded solidarity (Portes & Sensenbrenner 1993) is a source of social capital that is associated with principled motivation whereby individuals of a group behave in

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a certain way primarily due to their perceived moral obligations towards the group (Portes & Sensenbrenner 1993). In case of migrants that are often disadvantaged compared to the host population, apart from similarities in language and culture, the sense of group membership is generated by shared migration experience and post-migration integration challenges binding the group members together and motivating them to support each other and to share resources that would benefit the whole group without any expectations in return (Gomez et al. 2015; Levanon 2014; Portes & Sensenbrenner 1993). Transferred to migrant entrepreneurship, self-employed migrants guided by bounded solidarity with their coethnic community and principled motivation to ‘give back’ to the community ‘are more likely to make their business resources available to other community members therefore contributing to the maintenance of the collective social capital of their community’ (Gomez et al. 2015: 23). Instrumental motivation, on the other hand, is based on self-interest and the norm of reciprocity (Gomez et al. 2015; Torche & Valenzuala 2011). It motivates people to act in a certain way in order to benefit. The resources are made available to others with an expectation that they will be reciprocated in the future. Reciprocity exchanges that involve giving, receiving, and returning ‘differ from purely economic exchanges in that the repayment time and form is not pre-determined and may indeed assume a different form from what was initially offered’ (Gomez et al. 2015: 22). The trust between the giver and the recipient that is based on the level of familiarity with one another is the key mechanism of reciprocity (Torche & Valenzuela 2011). As stated by Gomez et al. (2015: 24): Unlike bounded solidarity, immigrant entrepreneurs with instrumental motivations are likely to engage in resource exchange with other community members or the com-

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munity as a whole if such exchanges will benefit themselves and their business in some way. If an immigrant entrepreneur with instrumental motivation sees a coethnic community member in possession of, or with access to, something he or she finds of use, then the entrepreneur will seek to exchange resources in order to access this commodity. However, if it is not in the entrepreneur’s best interest to engage in an exchange, he or she will choose not to do so because the individual does not feel a sense of obligation toward the co-ethnic group members and the community. Thus, an immigrant entrepreneur with instrumental motivation to engage in the exchange of resources with the community will primarily focus on developing a successful business as opposed to benefiting his or her co-ethnic community. Enforceable trust (Portes & Sensenbrenner 1993) is a source of social capital that emerges when members of a group share norms, values, as well as expectations that members of the group will behave in a certain way (Gomez et al. 2015; Fukuyama 1986; Levanon 2014). In contrast to reciprocity exchanges, however, enforceable trust is ‘underpinned by an awareness of the possible consequences of noncompliance with the norms and expectations established by the community. In other words, resources are shared due to the anticipation of rewards or punishments’ (Gomez et al. 2015: 23). With enforceable trust, the expectation of a return is not necessarily directed to the recipient but expected from the community, for instance increased status and reputation (Gomez et al. 2015). Apart from potential cooperation pressure from the community and fear of sanctions, heavy reliance of social capital from dense networks in a migrant community is also associated with isolation from the mainstream economy and limited social mobility (Bates 1994; Goebel & Pries 2006; Gold 1994; Kanas et al. 2009; Kim 1999; Nee et al. 1994). Although ethnic resources are particularly relevant for

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‘getting by’ in the start-up phase of business, in the long-term perspective ethnically mixed social networks foster business growth, enabling ‘getting ahead’ (Sequeira & Rasheed 2006). Granovetter (1995) describes the mechanism of coupling and decoupling whereby migrants draw on the resources from the migrant community (mainly strong ties to family and peers) in the initial phase of business establishment. Over time, however, successful entrepreneurs tend to broaden their business ties beyond this group favouring specialised ties (Wellman 1984) in order to gain more autonomy and operate in larger markets. Woolcock (1998) differentiates between embedded (intra-community ties) and autonomous (extracommunity ties) social relationships as two distinct forms of social capital. He refers to embedded social capital as integration and to autonomous social capital as linkage, emphasising that strategic combination of these two types of social capital is essential to sustain economic development. One of the most prominent differentiations in the social network analysis research is the concept of bonding and bridging social capital (Putnam 1993). Bonding social capital involves ties to people of a similar background. Bonding networks are usually exclusive networks characterised by strong ties. Strong ties (Granovetter 1973, 1983) are close, stable, and binding relationships based on emotional closeness and trust, with high degree of reciprocity and solidarity such as, for example, relationships between family members or friends. Bonding networks are often dense and multiplex, with a high degree of homophily, connecting people who are similar in some important way. Strong bonds between people contribute to sharing of resources (Lin 2001). Family is an example of a solidaristic small group that embodies bonding social capital involving mutual obligations and trust whereby family members sacrifice for and benefit from each other (Sanders & Nee 1996). A study by Nee and Sanders (2001) shows that value of family resources for labour market integration depends on intra-family financial, human, cultural,

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and social capitals that together constitute family capital and migrants ‘with the lowest stock of family capital rely more on social ties embedded in the ethnic community as a substitute for the social support provided by a family’ (Nee & Sanders 2001: 407). Families with high family capital are more likely to establish inter-ethnic networks and operate in the open economy. Bridging social capital, on the other hand, links ‘people who are unlike one another’ (Putnam & Goss 2002: 11). Bridging networks have an inclusive character, and trust is transferred from the group to broader social circles. They are characterised by weak ties. Weak ties (Granovetter 1973, 1983) are loose relationships with low-level emotional investment. Their strength is in providing ‘people with access to information and resources beyond those available in their own social circle’ (Granovetter 1983: 207). Granovetter (1973, 1983) emphasises the purposive character of weak ties. Weak ties are most valuable if they bridge social distance by linking people from different social positions. They are especially advantageous for network actors in a brokerage position connecting structural holes (Burt 1992, 2001) in networks as they enable non-redundant information flow and new opportunities (Burt 2001; Putman 2000). Weak ties are particularly valuable in the growth stage of business, especially when migrant entrepreneurs seek to extend their business beyond the ethnic market (Siqueira & Rasheed 2006). Although weak ties are essential for access to non-redundant information, they do not guarantee reliable advice or commitment that requires mutual trust (Ulhoi 2005). While weak ties are associated with generating new ideas, strong ties are associated with problem solving (Ulhoi 2005). Quantitative migration studies dealing with social capital of migrants often operationalise intra-community ties as bonding social capital and contacts to natives as bridging social capital. This is partly due

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to conceptual ambiguity and the limitations of the available secondary data that does not allow a more elaborated differentiation (Geys & Murdoch 2008, 2010). This quite simplistic kind of differentiation has been criticised in recent studies (e.g. Leonard 2004; Ryan et al. 2008). Prescribing bonding social capital to migrant communities ignores the possible diversity within a general migrant community, assuming close relationships between all co-ethnics while loose contacts between co-ethnics are simply not hypothesised. Although most studies of migrant businesses emphasise the importance of ethnic intra-community social capital for business formation, they rarely look at its content and the context of accessibility, assuming that it is evenly distributed and available to all migrants of the same origin. Such an assumption ignores the role of group membership, individual choice, and competition among entrepreneurs (Franzen & Pointer 2007; Waldinger 1995). The bonding-bridging dichotomy in migration research is based on an assumption that migrant communities are homogenous. In reality, however, different members of the same migrant community can have different social positions in that community. Therefore, bridging is also possible within the migrant community. Geys and Murdoch (2008, 2010) note that bridging can be internal (within the group) and external (across groups). Geographical categorisation of migrants according to their country of origin — often used in migration studies (e.g. for statistical purposes) — ignores possible intra-group heterogeneity (Salway 2007). In their study of businesses run by Iranian migrants in the USA, Light et al. (1993) developed a concept of internal ethnicity after they discovered that there were four subgroups of migrants from Iran that differed in terms of religion and ethnicity (Muslims, Armenians, Jews, and Bahai) and each of the subgroups had its own distinct ethnic economy so that the concept of a general ‘Iranian economy’ based on shared nationality was empirically meaningless. Another study of self-employed Armenians in Los Angeles by DerMartirosian et al. (1993) demonstrated that despite the same ethnic

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origin there were several subgroups of Armenian ethnic economy with distinct characteristics depending on the country of origin of Armenian migrants. The authors developed the concept of subethnicity to refer to economic activities of migrants sharing the same ethnicity but different nationalities and migrating to the host country from different countries. Both studies demonstrated that migrant communities are not a priori homogeneous, and especially in heterogeneous migrant communities consisting of several subgroups with their own (sometimes exclusive) social networks and groupspecific resources, bridging across these subgroups can be an important strategy for accessing additional resources. Having contacts with the native population, on the other hand, is not necessarily always a valuable resource for social mobility. If migrants have only contacts with natives who are in the same or lower social position as they are, they might benefit from inter-ethnic bridging to widen their networks which might be helpful to gain more information about job opportunities or to improve their language and intercultural skills, but it is primarily status bridging that matters for social mobility of disadvantaged persons (Erikson 1996; Lancee 2010; Lin 2001). This problem is, for example, explicitly mentioned in the concept of segmented assimilation (Portes & Zhou 1993). Status bridging can occur both within and outside the migrant community. According to Putnam (2000) access to institutions contributes to status bridging. As members of a community tend to have different hierarchical social statuses, the value of social capital might depend on the type of connections. Social capital is functional and dynamic (Ryan & D’Angelo 2018). Ryan & Mulholland (2014) emphasise that in ‘studying migrant networking, it is necessary not only to consider the structure and composition of networks but also their content — the nature of the relationships that exist within different social ties’ (Ryan & Mulholland 2014: 149). It is not simply the connection that matters but the nature of the relationship as different types of relationships are

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linked to different functions and types of resources. Especially in case of migrant entrepreneurship, it is important to look at further characteristics of business-related social ties that go beyond a rather simplistic differentiation between intra-community and intercommunity social capital. Strong and weak ties can be found both between members of a migrant community as well as between migrants and natives. With weak ties it is reasonable to differentiate between the social positions of the two individuals involved in the contact dyad. Ryan (2011) suggests differentiating between horizontal ties connecting individuals in the same social position and vertical ties connecting individuals in different social positions. Szreter & Woolcock (2004) refer to horizontal ties among heterogeneous actors as bridging social capital and to vertical ties (relationships with institutions or groups and individuals that are not of similar social, economic, or power status) as linking social capital emphasising that these two types of social capital are associated with different accessibility constraints, economic functions, and resources. Uzzi (1999), for example, argues that business networks are most effective when they combine a mix of strong and weak ties (network complementarity). Strong ties are usually based on loyalty and reciprocity, and individuals are more likely to support each other if there is a strong bond between them. Weak ties, on the other hand, are a valuable resource for new information flow and innovative ideas. Uzzi (1997), in discussing competitive advantages, demonstrates that trust generated from networks can have a positive impact on economic transactions by differentiating between purely price-regulated arm’s-length business ties and embedded ties that involve trust and reciprocity. Existing networks and third-party referrals foster embedded ties (Hollstein 2011). Further, business relationships involve different degrees of formalisation (e.g. informal, formal, institutionalised). According to Misztal (2000: 19) informal ties are ‘face-to-face, homogeneous, communal and spontaneous types of relations’. Formal ties are usually ‘heterogeneous, rational, contract-based,

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calculative types of relations’ (Misztal 2000: 19). Existing literature on migrant entrepreneurship demonstrates that migrants often rely on informal networks (Flap et al. 2000; Portes 1998; Waldinger et al. 1990), especially in the start-up phase, which is partly explained by problematic access to formal networks and institutional support (Flap et al. 2000; Hagan 1998; Hernandez-Plaza et al. 2014; Portes 1998; Rusinovic 2005). While a growing number of studies analyse the function of social capital that migrant entrepreneurs receive through their embeddedness in the migrant community as well as in the wider social and institutional environment of the receiving country, a detailed analysis of how the social capital is accessed is lacking. Another aspect that has been largely neglected in studies of migrant entrepreneurship is the experiential realm of social capital, for instance, how migrant entrepreneurs experience business-related relationships within and outside their community (Gomez et al. 2015; Torche & Valenzuela 2011).

2.3 Transnational entrepreneurial activities of migrants1 Like social capital, the concept of transnationalism has increasingly gained importance in migration research in the last two decades (Pries 2001; Vertovec 1999). Pioneers of transnationalism research Glick Schiller, Basch, and Blanc-Szanton (1992) defined transnationalism as ‘the process by which immigrants build social fields that link together their country of origin and their country of settlement’ (Glick Schiller et al. 1992: 1). Transnationalism generally refers to ties and interactions connecting individuals or institutions across national borders (Vertovec 2009). In recent transnationalism research, the prefix ‘trans’ refers to social, economic, political, and cultural 1

This section is partly based on Sommer & Gamper 2018.

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cross-border relations. Partly overlapping concepts like transnational social spaces (Faist 2000b; Pries 2001), transnational social fields (Glick Schiller 2005), or transnational social structures (Molina et al. 2014) describe this phenomenon. Despite some differences between these concepts, social networks play a central role in all of them. Cross-border economic activities are not a new phenomenon, and international trade fostered by various diaspora across the world had existed for a long time before globalisation (Light 2008). However, progress in communication technologies, lower transport costs, increased migration, and restructured international trade, as well as the globalisation of capital and labour, have increased the intensity and diversity of transnational entrepreneurial activities (Itzigsohn et al. 1999; Portes et al. 1999; Light 2008). Increasing cross-border economic activities is not an exclusive feature of migrant enterprises. The internationalisation of economic activities is a common strategy of economic growth amongst firms in the globalisation era (Drori et al. 2009). The term transnational entrepreneurship (TE) is mostly applied to internationalisation of businesses run by migrant populations and treated as a special case of international entrepreneurship (Drori et al. 2009). Involvement in dual social fields and exploitation of cross-border social capital for business opportunities are distinctive features of TE. TE is associated with dual embeddedness in different political-economic institutional settings as well as in different cultural and knowledge frameworks and the ability to balance this dual embeddedness forming entrepreneurial strategies within a given social context (Driori et al. 2009; Light 2008). This dual affiliation distinguishes TE from classical international entrepreneurship. The economic adaptation of TE is often enabled by the mobilisation of social networks across borders whereby self-employed migrants use both their local and transnational connections (Chen & Tan 2009). Therefore, transnational ties should not be analysed in isolation but together with the local ties in the

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country of destination. In the case of transnational brokerage (Faist 2014), when migrant entrepreneurs function as mediators connecting networks in the country of destination with networks in the country of origin (or another country), the relationship between actors in different countries that are interconnected through the migrant entrepreneur might impact the overall development of transnational business. Transnational entrepreneurial activities of self-employed migrants have been gaining attention of scholars from various disciplines (e.g. Bagwell 2015; Driori et al. 2009; Guarnizo 2003; Landolt 2001; Morawska 2004; Mustafa & Chen 2010; Portes et al. 2002; Rusinovic 2008). Migrants involved in transnational entrepreneurial activities can take advantage of their language skills, knowledge of international markets, as well as the ability to navigate different cultural systems and structural frameworks (Light 2008; Schaland 2013). Furthermore, transnational social ties are seen as a resource that can provide self-employed migrants with additional market advantages (Chen & Tan 2009; Goebel & Pries 2006; Light 2008; Saxenian 1999, 2002). The existence of transnational business activities often depends on the continuous maintenance of social ties beyond the national borders of one state (Itzigsohn et al. 1999). Transnational migrant entrepreneurs activate existing social ties in their country of origin or strategically build up new contacts that could be beneficial for their economic activities (Landolt 2001; Zhou 2004). Drori at al. (2009) differentiate between three domains of networking that are used by transnational entrepreneurs: network of origin, network of destination, and network of industry. The latter consists of professional ties that evolve as a part of previous education and work experience. Although transnational entrepreneurial activities usually involve the country of destination and the country of origin, recent research shows that transnational entrepreneurship is increasingly becoming

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characterised by multi-polar rather than bipolar links (Bagwell 2015; Sommer & Gamper 2018). Migrants can have family members in different countries or acquire transnational business contacts in third countries directly through their network of industry or their connections in diasporic nodes (communities of migrants of same origin in different geographic places, Voight-Graf 2004). The links between diasporic nodes in different countries enable transnational flows of information, money, ideas, and products (Voight-Graf 2004) and are a valuable resource of transnational social capital beyond the country of origin and the country of destination. Itzigsohn et al. (1999) differentiate between narrow and broad economic transnationalism as two extremes of a continuum. Narrow economic transnationalism is characterised by regular transnational contacts and economic interactions as a central element of the business. Broad economic transnationalism, on the other hand, is defined as economic transactions ‘that are more or less recurrent, but do not involve regular movement or constant involvement between the two places’ (Itzigsohn et al. 1999: 327). These two different strategies indicate different degrees and types of transnational involvement. Regular and intensive long-term involvement in transnational economic activities in the sense of narrow economic transnationalism requires a higher degree of formalisation as compared to sporadic transnational entrepreneurial activities in the sense of broad economic transnationalism that often have an informal character. Portes et al. (2002: 284) define transnational entrepreneurs as ‘selfemployed immigrants whose business activities require frequent travel abroad and who depend for the success of their firms on their contacts and associates in another country, primarily their country of origin’. Their definition follows the narrow economic transnationalism approach. This approach, however, neglects sporadic transnational involvement and especially informal activities. Further, the

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need for frequent travel abroad is questionable in times when modern communication technologies enable cheap and regular crossborder contact and online payment possibilities. Additionally, some sectors engaging in transnational economic activities (e.g. IT) are relatively de-territorialised and do not require regular physical presence. Further minimising the need for frequent travel are trusted persons (e.g. family members) monitoring business activities who are based abroad (Rusinovic 2008). Rusinovic (2008) suggests differentiating between substantial, moderate, and limited transnational involvement based on the degree of involvement and movement. In her study, Rusinovic (2008) demonstrates that substantial and moderate transnational involvement are more common for the first generation of migrant entrepreneurs, while the second generation is characterised by moderate and limited transnational involvement. Despite the increasing number of transnational businesses among migrant entrepreneurs (Goebel & Pries 2006; Portes 2000), a large proportion of self-employed migrants do not get involved in transnational economic activities as part of their business (e.g. Leicht & Langhauser 2014; Rusinovic 2008; Sommer 2011). In her study Rusinovic (2008) looks at reasons for migrants’ involvement in transnational economic activities. While economic motivation, the necessity of transnational involvement as an integral part of the business strategy, and idealistic motivation (e.g. desire to maintain links with the home country and to contribute to its economy) were the main reasons for transnational economic activities among transnationally active migrant entrepreneurs in the Netherlands, self-employed migrants who did not employ transnational activities in their business mentioned the following reasons for their decision: transnational involvement was irrelevant to their business; economic activities in their home country were not attractive to them either because of a weak economy or the way business was done in their home country; and the absence of trusted persons and transnational

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networks abroad (Rusinovic 2008). According to Rusinovic (2008: 447) transnational economic activities require transnational capital which is a combination of ‘economic capital (money to invest, and/or travel regularly to or do business in the country of origin), cultural capital (bilingualism, knowledge of overseas markets, international management experience) and social capital (such as contacts, relatives or family in the country of origin whom one can trust and/or can do business with)’. Although involvement in transnational entrepreneurship offers migrants some business advantages, it is associated with certain challenges. Transnational entrepreneurs need to constantly evaluate and negotiate opportunities, constraints, and obligations across borders (Landolt 2001). Furthermore, they need the ability to flexibly operate between at least two different and possibly changing structural and cultural business contexts. Existing contacts and family can be helpful for providing financial start-up capital and access to business networks abroad or being directly involved in the business and serving as trusted persons (Rusinovic 2008). These existing contacts alone, however, might not be sufficient as it is the embeddedness in various formal and informal transnational networks that is crucial for the survival and success of transnational business (Sommer & Gamper 2015). As Guarnizo et al. (2002) point out: ‘the larger or more difficult the attempted transnational project is, the stronger the social networks required to sustain it’ (Guarnizo et al. 2002: 10). However, linking social capital — that is, vertical ties to persons in higher positions or institutions — is not easily accessible. Apart from migrants’ resources, the geopolitical, institutional, and socio-economic considerations such as visa and trade regulations, geographic proximity, the migration system in place, financial stability on both ends of the transnational chain (Waldinger & Fizgerald 2004), as well as historical international relations between the respective countries (Miera 2008) can affect the extent to which transnational entrepreneurship is common among a certain migrant

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group in a particular place. Given the aforementioned constraints and challenges, narrow economic transnationalism is relatively rare among migrant entrepreneurs. Broad economic transnationalism, on the other hand, is often applied as an additional complementary strategy that enables certain business advantages (e.g. Rusinovic 2006, 2008; Schmiz 2011; Sommer & Gamper 2018). Although social capital plays an important role for transnational economic activities of migrants, there is a research gap in the literature on migrant entrepreneurship regarding the nature and function of social ties involved in different types of transnational economic activities (Sommer & Gamper 2018). While research on transnational social support in migrants’ private personal communities has recently increased (e.g. Bilecen 2015; Bilecen & Sienkiewicz 2014; Bojarczuk & Mühlau 2018; Dahinden 2005; Ryan 2011; Gamper & Fenicia 2013; Herz 2015; Sommer & Vogel 2016; Vogel & Sommer 2013), showing that the types of support provided by transnational social ties differ from the types of support that can be gained from the local community, there is still a lack of research that explicitly analyses access to and the function of transnational ties for migrants’ economic activities.

2.4 Research questions and conceptual framework The aim of this study is to explore the types of social capital used by self-employed migrants from the former Soviet Union (FSU) in Germany for their entrepreneurial activities. Specifically, at a relational level, the aim is to analyse what type of business-related social relationships dominate for different types of economic activities given their chosen market strategy. A further focus of the study is how these business-related ties are accessed. Additionally, the study seeks to demonstrate the dynamic nature of social capital and

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entrepreneurship by examining how business-related social relationships and economic activities (co-)evolve over time. The final section of this study explores social capital that is used for transnational economic activities of the FSU migrants. The theoretical concepts outlined in the previous sections serve as analytical tools for the analysis of the interview data. Entrepreneurial activities of migrants in this study are analysed through the lens of the mixed embeddedness concept (Kloosterman & Rath 2001; Klossterman 2010). Although the multi-level mixed embeddedness approach emphasises the interaction between the micro level (entrepreneur), meso level (broader socio-economic context, e.g. markets, networks), and macro level (politico-institutional setting), this study mainly focuses on the micro and meso levels analysing the interplay between the market strategy and the social embeddedness of migrant entrepreneurs. The macro context, which is not the focus of this study, is only linked to the analysis where relevant in a loose way. Its relevance becomes especially apparent in the section dealing with transnational economic activities. Kloosterman (2010) refers to the opportunity structure as a ‘strategic window of entry’ (Kloosterman 2010: 40) whereby markets are ‘the crucial components of the opportunity structure’ (Kloosterman 2010: 28) as opportunities are intrinsically linked to markets, which in turn are regulated by demand. Entrepreneurial opportunities to start and maintain a business in a particular market depend on market accessibility, which in turn depends on individual and group resources. This study specifically looks at two dimensions of the market access barrier: the extent of the market (Engelen 2001) and the required qualification level (low/middle-skilled vs. high-skilled). The extent of the market refers to the clientele potential that a particular market strategy can reach (Engelen 2001). Although migrant entrepreneurship was traditionally associated with ethnic markets with limited market extent, recent data demonstrates that migrants increasingly

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develop their businesses outside the traditional sectors associated with migrant entrepreneurship (OECD 2010). The composition of the clientele serves as an indicator of the market extent in this study whereby the market extent is seen as a continuum (see Figure 1) with the extreme points migrant market (businesses entirely embedded in a migrant economy milieu with co-ethnic clientele) and mainstream market (businesses entirely embedded in the mainstream economy with non-co-ethnic clientele for which embeddedness in the migrant community is irrelevant). In between these two extremes is the mixed market that is characterised by a strategic mix of coethnic and non-co-ethnic clientele and partial embeddedness both in migrant and mainstream economies. The choice of the market strategy is linked to three aspects of transaction costs economics that are analysed in this study: bounded rationality, opportunism, and uncertainty (Yang et al. 2012). Bounded rationality reflects the limited ability of individuals to achieve optimal rationality due to various constraints (Simon 1993), or ‘the inability of economic actors to anticipate properly the complex chain of contingencies that might be relevant to long-term contract’ (Granovetter 1985: 494), or due to external constrains like legal regulation or problematic access to certain business networks (Tolciu 2011). As noted by Aldrich & Zimmer (1986: 11): People are limited by bounded rationality, suffer from limited or biased information and poor communication, and are subject to processes of social influence and reconstruction of reality. Hence comprehensive explanations of entrepreneurship must include the social relationships through which people obtain information, resources and social support. Opportunism is ‘the rational pursuit by economic actors of their own advantage, with all means at their command, including guile and

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deceit’ (Granovetter 1994: 79). According to Granovetter (1985: 494): Opportunism is mitigated and constrained by authority relations and by the greater identification with transaction partners that one allegedly has when both are contained within one corporate entity than when they face one another across the chasm of a market boundary. Uncertainty reflects perceived ambiguity in interaction with other economic actors (individuals, organisations, institutions) and required ongoing agency adaptation (Slater and Spencer 2000). The interplay of these three aspects of transaction costs economics (bounded rationality, opportunism, and uncertainty) has an impact on the market strategy decision and on how migrant entrepreneurs leverage their resources to minimise transaction costs (Yang et al. 2012). It is assumed that each of the three markets extents are associated with different resources that are mobilised by migrant entrepreneurs: whereas ethnic resources are specifically relevant for the migrant market and hardy relevant for the mainstream market, mixed market strategy as illustrated by Nee et al. (1994) makes use of both ethnic and non-ethnic resources. As this study deals with small entrepreneurship that requires relatively low financial start-up capital, economic resources as an access barrier are left out of the conceptual model of opportunity structure applied in this study. Human capital is partly integrated in the model in the form of a required qualification level as a further aspect of the market access barrier. First, a market strategy based on the composition of the clientele and the required qualification level is assigned to each of the analysed businesses. Then the social capital dimension is analysed by looking at types of business-related social relationships dominating for each of the submarkets with a particular focus on how they are accessed and which function they have for the business.

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Further, the mixed embeddedness model is extended through the transnational perspective. To reflect transnational involvement in both the narrow and broad sense, including sporadic and informal transnational business activities, the term transnational entrepreneurship in the narrow sense as defined by Portes et al. (2002) is rejected in this study in favour of the term transnational entrepreneurial activities (TEA). Given the findings of the empirical studies mentioned in the previous section showing that involvement in broad economic transnationalism as a complementary strategy is more common among migrant entrepreneurs than involvement in narrow economic transnationalism, it is assumed that TEA are predominantly used to serve the markets (migrant market, mixed market, mainstream market) in the receiving country. Even when the clientele is based abroad (in the country of origin or another country), TEA are still formally or informally linked to one or several markets in the receiving country because the self-employed migrants are located there and are simultaneously embedded in the socioeconomic context of the receiving country through suppliers, employees, or cooperation with other businesses or institutions in the receiving country. Although TEA are more likely to involve the country of origin, depending on the market strategy, TEA can also link the receiving country with a country other than the country of origin or have a multi-polar direction (e.g. Bagwell 2015). As businesses do not operate in an institutional vacuum, in line with the mixed embeddedness model, the politico-institutional context at the national (and in case of TEA also at the transnational level) is integrated in the applied conceptual model of the opportunity structure. Figure 1 illustrates the conceptual framework of opportunity structure developed for this study. This study applies the resource-oriented perspective of social capital. Further, to reflect the nature of dominant business-related social ties for different market strategies, relevant concepts from the mi-

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gration studies, social network analysis, and entrepreneurship research discussed in the previous sections are integrated in the analysis. First, this study differentiates between intra-community (ties with other migrants of the same origin), inter-community (ties with natives or other migrant groups), and transnational ties (ties outside the receiving country) as well as ties between individuals, organisations, or institutions and different degrees of formalisation. Further, Uzzi’s (1997) concepts of arm’s-length ties (purely price-regulated relationships) as well as embedded ties (business relationships that involve a certain degree of trust and reciprocity) and Granovetter’s (Granovetter 1973) concepts of strong and weak ties are also integrated into the data analysis. Figure 1: Conceptual framework of opportunity structure for migrant businesses

Source: Own figure.

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Supporting Ryan (2011), it is argued that there is a need to distinguish between horizontal ties (connecting individuals from similar social positions) and vertical weak ties (connecting people from different social positions). Within the category of vertical ties, this study proposes to further differentiate between upward and downward vertical networking, as in the case of self-employed migrants, both upward weak ties to individuals from higher social positions or to institutions as well as downward weak ties to individuals from lower social positions (e.g. in form of access to cheap labour force) can be a valuable resource for economic activities. ‘Social position’ in this study is an abstract concept that is not measured by class and income, but is related to a concrete situation at a given time point reflecting a relative ‘power’/’resource’ positioning of one individual compared with another individual. This understanding confers a dynamic nature on the concept of ‘social position’. For example, an interviewed entrepreneur can have at the time of the interview an equal or similar social position with a specific weak tie from his or her business network, as this relationship developed over time. What is of interest for the research question of network accessibility, however, is the social position of the interviewed person at the time they first got in contact with the particular weak tie. The study further looks at the function of different types of businessrelated social ties of migrant entrepreneurs for economic activities such as financial support, information exchange (e.g. about market opportunities, products, suppliers, customers, available locations for business premises), business or legal advice, practical help (e.g. labour, help with office renovation, assistance with book keeping or tax declarations), or referrals to business partners and clients. To analyse the access to different types of business-related social relationships, the study looks at different spheres that provide migrant entrepreneurs social capital such as family and friendship circles, the broader migrant community, a network of industry (ties acquired

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through previous professional activities [Driori et al. 2009]), and contacts abroad. Furthermore, the study differentiates between pre-migration and post-migration social capital and looks at the contact paths, for example, the use of existing contacts within and outside the migrant community, the use of existing contacts abroad, referrals to new relevant contacts by existing contacts, the direct approach of relevant business-related ties without previous personal contact, or contacts via diasporic nodes (migrant communities outside the receiving country [Voight-Graf 2004]). As both entrepreneurship and social capital are characterised by a dynamic nature, the study explores how business-related social relationships and economic activities (co-)evolve over time in general and, in particular, how the composition and use of business-related social capital change when migrants change their market strategy (e.g. moving from the migrant market to the mixed market). Therefore, both start-up businesses (less than 5 years at the market) and established businesses (more than 5 years at the market) as well as businesses that have changed their market strategy over time are included in the sample of this study.

3 Migrants from the former Soviet Union in Germany This chapter provides an overview of the migration process of migrants from the former Soviet Union (FSU) to Germany. It starts with a short overview of the migration history of the two largest FSU migrant groups in Germany — ethnic Germans and Jewish migrants, followed by an overview of empirical findings about the social and labour market integration of these two migrant groups in Germany. The last subsection demonstrates the findings from available studies on self-employment among FSU migrants.

3.1 Migration to Germany According to the data of the German Microcensus from 2015, about 11.5 million people living in Germany (14% of the total population) were born outside Germany (Statistisches Bundesamt 2016). At present, migrants from the former Soviet Union (FSU) and Turkish migrants are the largest migrant groups in Germany. The collapse of the Soviet Union in 1991 prompted massive emigration of its population to other countries of the world. About 2.6 million migrants from the former Soviet Union came to Germany, predominantly in the 1990s (Sommer 2008). FSU migrants are a heterogeneous group consisting of several subgroups such as ethnic Germans and Jewish migrants, and to a much lesser extent marriage migrants, students, labour migrants, and refugees. These subgroups have their own legal status with regard to their residence rights in Germany. Apart from that, they are embedded in distinct social networks within the general Russian-speaking community in Germany (Betz & Darieva 1997; Dietz 2005; Gamper & Fenicia 2013). The following section will focus only on the two large FSU migrant subgroups — FSU ethnic Germans and FSU Jewish migrants — as © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 E. Sommer, Social Capital as a Resource for Migrant Entrepreneurship, https://doi.org/10.1007/978-3-658-29141-9_3

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there are no available studies on social and labour market integration of other FSU migrant subgroups in Germany. Most FSU migrants arrived in Germany as ethnic Germans — (Spät)Aussiedler meaning ‘(late)resettler’ in German — or Jewish quota refugees (Jüdische Kontingentflüchtlinge). FSU ethnic Germans are descendants of German migrants to tsarist Russia who have lived as a German minority in several republics of the former Soviet Union for several generations. After becoming the Empress of Russia in 1762, Catharina II, who was German, proclaimed a privileged immigration policy (e.g. military service and tax exemption, granted internal autonomy of settlements, provision of land) for Germans willing to move to Russia and to settle in the rural areas of the Volga river that were largely unsettled at that time (Bade & Oltmer 1999; Eisfeld 2000). This policy was the start of German migration to Russia. It was extended later to more unsettled areas in Russia and resulted in the development of autonomous segregated German settlements with their own schools, churches, newspapers, and local economy. These settlements were characterised by the use of the German language, Protestant religion, and intra-ethnic marriages. After the abolition of serfdom in Russia, the German minority lost their privileged status. With the start of World War II, the German minority was deported from central parts of Russia to peripheral rural areas in Kazakhstan and Siberia. Until 1956, Germans were not allowed to leave these settlements and move to other areas of the Soviet Union (Bade & Oltmer 1999; Eisfeld 2000). After World War II, German language competence among younger generations has diminished considerably while the proportion of mixed marriages with Russians resulting in bicultural families has markedly increased (Dietz 2000). FSU Germans began migrating to Germany in the late 1980s after the Soviet Union allowed emigration of Soviet citizens under Gorbachev’s government in 1986 (Dietz 2000) for various reasons. Some

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emigrated because of their discrimination in the Soviet era (e.g. limited access to higher education, prohibition of return to areas they were deported from) or due to a desire to return to their historical homeland. Others left due to the economic crisis in the successor states of the USSR immediately preceding and following the collapse of the Soviet Union, and some wished to reunite with relatives who had already emigrated. According to the data of the German Federal Office of Administration2, which is responsible for the approval and administration of migration applications of FSU ethnic Germans, about 2.4 million FSU ethnic Germans, mostly from Kazakhstan and Russia, had arrived in Germany by 2016. The peak of FSU migration was in the early 1990s, with about 200,000 ethnic Germans arriving each year between 1992 and 1996. There has been a sharp decline of migration since 2005 with less than 8,000 people arriving per year. The rapid growth of migration in the 1990s was triggered and supported by networks of earlier cohorts (especially relatives) of FSU migrants (Dietz 2000). Beginning in 1996, individuals applying for ethnic German status (and since 2005 also their non-German spouses) must pass a German language test to attain the status. FSU migration to Germany is based on the principle of ethnic repatriation. In the case of ethnic Germans from the former Soviet Union and Eastern Europe, the post-war German constitution recognised their rights as former German citizens and/or persons belonging to the German people and regulated their legal basis in the Bundesvertriebenengesetz (BVFG). It provided FSU Germans with “privileged acceptance as German citizens” (Dietz 1999: 903) granting them as well as their spouses and dependent children immediate entitlement to German citizenship upon their arrival in Germany and access to various social and economic benefits, such as settling-in 2

Retrieved from http://www.bva.bund.de/DE/Organisation/Abteilungen/Abteilung_BT/Spaetaussiedler/statistik/statistik-node.html [10.08.2017].

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assistance, integration assistance through free language courses, labour market integration support (e.g. retraining and further professional development programs), as well as pensions for older migrants (Baumann & Mikka 2012; Steinbach 2001). FSU ethnic Germans are on average relatively young compared to the native population, but slightly older than the overall foreign population in Germany (BAMF 2015). Migration of FSU Jews to Germany was triggered by the declaration of the last government of the German Democratic Republic’s willingness to accept migration applications of FSU Jews who experienced discrimination in the former Soviet Union (Kogan & Cohen 2008). This policy was adopted in 1991 after German reunification by the government of the Federal German Republic, where until 2005 they received the status of Jewish Quota Refugees. The quota refugee status was first developed as a regulation for acceptance of Vietnamese refugees in Germany (Harris 1999). The Quota Refugee status allows qualifying persons (in the case of FSU Jews, these are persons with at least one Jewish parent) as well as their spouses and dependent children to attain the status of an accepted asylum seeker upon arrival to Germany (Becker 2001). Approximately 215,000 FSU Jews, including non-Jewish spouses, have arrived in Germany since the 1990s, and are mostly from Ukraine and Russia (BAMF 2015). Since 2005, with the introduction of the German Migration Act (Zuwanderungsgesetz) that regulates migration rights for different population groups, the Jewish Refugee Quota Status has been suspended. The new regulation requires a German language test for Jewish migrants. Since 2005, the number of Jewish migrants arriving in Germany has sharply decreased, with less than 1,000 people registered each year between 2010 and 2015 (BAMF 2015). Jewish migrants are eligible to apply for German citizenship after residing in Germany for six years (Liebau 2010). Upon their arrival in Germany, they receive an unlimited residence permit and unrestricted access to the labour market. Like ethnic Germans,

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they are entitled to social and economic assistance such as housing support, six-month full-time free language courses, social security benefits, and labour integration programs (Kogan & Cohen 2008). FSU Jewish migrant groups are characterised by a high proportion of individuals with tertiary educational degrees (Cohen & Kogan 2007) and a relatively high proportion of older people — about 20 per cent were older than 65 and another 20 per cent were between the ages of 50 and 65 when they arrived in Germany (BAFM 2008). In order to adequately manage the mass migration from the FSU, in 1996 Germany implemented the Wohnortzuweisungssgesetz legislation to assign newly arrived FSU migrants (both ethnic Germans and Jewish migrants) to a residence area where they would be eligible for integration and welfare assistance in the first two years of their stay in Germany. This was done in order to avoid high spatial concentration of migrants in specific areas which would burden budgets, administrations, social cohesion, and the overall infrastructure of local communities (Wenzel 1999). The goal of the policy was to distribute FSU migrants across the entire country so that the federal states share integration-related costs and responsibilities. In the first two years after migration, ‘most of the newcomers’ financial benefits are conditional on their remaining where they are sent, even though individuals are free to take up residence in any part of the German Federal Republic’ (Kogan & Cohen 2008: 106). Whereas Jewish migrants prefer settling in urban areas, FSU ethnic Germans reside predominantly in rural areas and in small or middlesized towns in Germany, reflecting the residence pattern of these two groups in their home countries (Harris 1999; Schoeps et al. 1996; Wenzel 1999; Worbs et al. 2013).

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3.2 Social integration FSU migration to Germany often involved migration of the whole family, including several generations (Dietz 2000). Although this situation may be beneficial for migrants in that it does not lead to fragmented lives common for other migrant groups, it also fosters higher reliance on the family and kin group. This is, for example, reflected in the dense networks where family and relatives take a central role, high degree of intergenerational solidarity, and relatively high multigenerational living arrangements found among FSU ethnic Germans (Baykara-Krumme 2008; Dietz 1999; Flake 2012; Haug 2007; Vogel 2012; Sommer & Vogel 2016; Worbs et al. 2013). Despite their German origins, the integration of FSU ethnic Germans into German society is associated with some difficulties. Later cohorts of FSU ethnic Germans arriving in Germany are particularly characterised by decreasing German language proficiency, mixed marriages, and bicultural backgrounds (Dietz 2000). Earlier cohorts whose native language was German were still faced with some communication-related challenges, as they typically spoke old German dialects no longer common in contemporary Germany (Bade & Oltmar 1999). Empirical studies dealing with social integration of FSU ethnic Germans demonstrate a general proclivity for co-ethnic networks (e.g. Bastians 2004; Bauer & Zimmerman 1997; Brüss 2006; Dietz 1999, 2005; Dietz & Roll 1998; Fenicia et al. 2010) and partly for segregation and social distancing from other population groups (Gamper & Eisenbürger 2005; Münz & Ohliger 1998; Retterath 2004; Vogelgesang 2008). According to Dietz (2000: 646), in the case of ethnic Germans ‘it is not formal organisations but family, friendship and personal relations that are the basis of networks, grounded in the

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traditional holding together of ethnic minority families, shared obligations and a common country of origin background.’ Bauer and Zimmermann’s (1998) study, however, shows that increasing durations of stay in Germany and higher provisions of governmental welfare benefits (measured on per capita expenditure by the federal state) decrease the probability of having co-ethnic friends among ethnic Germans. This finding suggests that strong public welfare support hinders heavy reliance on the migrant community. Further, the so-called ‘association of compatriots of Germans from Russia’ (Landsmannschaft der Deutschen aus Russland), a migrant nonprofit umbrella organisation representing political and social rights as well as cultural interests of FSU ethnic Germans on federal and regional levels, is involved in social, political, and labour market integration of ethnic Germans, offering them a German-wide networking platform, social counselling, legal advice, and various information exchange events (Haug & Sauer 2006). In addition, in some rural areas with high concentration of ethnic Germans, local (mostly self-organised) independent churches (Freikirchen), such as conservative communities of the Mennonite, Baptist, Adventist, and Pentecostal Churches, play an important role for social integration of ethnic Germans, providing a support network based on reciprocity and mutual assistance among its members (Elwert 2015; Löwen 2014; Weiß 2013) including support for self-employment (Breuer 2019). Similar to ethnic Germans, Jewish migrants show a propensity for co-ethnic networks and strong engagement with a local network of family and relatives (Dietz 2000; Haug 2007). Schütze (2003), analysing social networks of younger Jewish migrants at three different time points, demonstrates that the number of native German network actors was linked to the acculturation strategy (assimilation, integration, separation, marginalisation [Berry 1990]) of the interviewees. More than half of the interviewees in her study did not change their initial strategy over time, whereas among those who

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did change their strategy, the change was mostly from separation to integration whereby their networks became more diverse, including a higher number of native Germans compared with networks collected at earlier time points. The study by Gamper & Fenicia (2013) comparing network composition of FSU ethnic Germans and FSU Jewish migrants illustrates a relatively low proportion of transnational ties in networks of ethnic Germans and a much higher proportion of transnational ties in networks of Jewish migrants. When ethnic Germans and Jewish migrants arrive in Germany, they spend about two to three weeks in a so-called ‘reception camp’ where administrative procedures are completed before they can move to the municipality to which they have been assigned. After that, most FSU migrants spend a few months in temporary accommodation for migrants before they move to their own accommodation. In addition to pre-migration contacts with relatives and friends living in Germany, these temporary accommodations and six-month full-time languages courses are among the main contact paths within the Russian-speaking migrant community in the first year of migration. Despite sharing the same language and experience of living in Soviet society, friendships between ethnic Germans and Jewish migrants are rare (Dietz 2000). According to Dietz (2000: 649), ‘the Jewish immigrants first of all integrate into Jewish communities in Germany, whereas ethnic Germans increasingly integrate into ethnic German minority enclaves’. Although less than half of FSU Jewish migrants joined Jewish religious communities (Jüdische Gemeinde) in Germany (BAMF 2008), the local Jewish communities are an important integration institution for FSU Jewish migrants as they are ‘heavily engaged in the social, economic, religious and cultural integration of Jewish immigrants’ (Dietz 2000: 644). Jewish religious communities provide assistance, for example, with additional language courses or housing support and ‘most Jewish immigrants do integrate at least partially’ (Dietz

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2000: 647) in these communities. Larger Jewish communities provide their own infrastructure with schools, childcare services, cultural and sports facilities, as well as social and psychological counselling (Schoeps et al. 1999). These religious communities are also a potential path to contacts in the German-speaking population through indigenous German-speaking Jewish members of the community. However, Schoeps et al. (1999) note that differences between the ‘old’ members and the ‘new’ members led to tensions in the Jewish communities. Smooth communication between the indigenous members and newcomers was hampered by a language barrier, problematic labour market integration of FSU Jews, socio-cultural differences (e.g. secular socialisation of FSU Jews in socialist society), and a clash of expectations (Schoeps et al. 1999). Furthermore, the sharp increase of members changed the group’s composition with FSU migrants now comprising the vast majority: about 90% of approximately 100,000 members of the German Jewish religious communities are FSU Jews (BAMF 2008). Schoeps (2005) notes the development of a ‘Russian-speaking culture enclave’ within the Jewish communities, whereby the changed Jewish community as a whole has become an important source of migrant social capital for FSU Jewish migrants.

3.3 Labour market integration The migration status of ethnic Germans and Jewish migrants differs substantially from other non-EU migrant groups in Germany (e.g. ‘guest workers’ who came to Germany as low-skilled labour migrants mostly from Turkey, Italy, Spain, and Greece). This is due to the concomitant institutional support provided by the German state to ethnic Germans and Jewish migrants, granting them privileged access to the German welfare system, citizenship (for ethnic Germans), and extensive integration support going far beyond what

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other non-EU migrants are entitled to (Kogan 2011). Despite this privileged status and their relatively high educational and qualification levels, FSU migrants, similar to other non-EU migrant groups, are faced with specific difficulties with regard to their labour market integration in Germany (Dietz 2000; Haug 2007; Haug & Sauer 2006; Kogan 2011; Liebau 2010). Both ethnic Germans and Jewish migrants, but especially Jewish migrants, show high unemployment rates in the early stage of their arrival to Germany (Brück-Klingberg et al. 2007; Haug 2007; Cohen & Kogan 2005). Although 73% of Jewish migrants in the survey conducted by Schoeps et al. (1999) had a tertiary education degree, 48% of the sample were unemployed (excluding those who were attending a full-time language course or re-training program at the time of the survey). According to the 2006 data of the German Socio-Economic Panel (Haug & Sauer 2006: 36), the employment rate of ethnic Germans in 2002 was lower than that of the native population (68% compared to 81% among natives in West Germany) but higher than among migrants from Turkey and former Yugoslavia (61%). There are several factors hampering smooth labour market integration of FSU migrants. Apart from the language barrier, problematic recognition of foreign diplomas and difficulties of the transferability of professional qualifications attained in the socialist politico-economic context, as well as lack of familiarity with the German economic and social systems and mechanisms of the German labour market, were among the main challenges of successful labour market integration in the early postmigration stage (Dietz 2000; Greif et al. 1999; Koller 1997). While male ethnic Germans have relatively good chances of labour market entry in the production and craftsman sector due to their qualification focus as skilled workers in technical and craftsman professions (Greif et al 1999; Worbs et al. 2013), female ethnic Germans were disproportionally employed in social, educational, and administrative sectors in their country of origin and, therefore, had difficulties in finding an equivalent employment in Germany due to

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the devaluation of qualifications attained in the FSU, resulting in professional displacement (Baden 1997; Greif et al. 1999). Ethnic Germans with tertiary education degrees had difficulties attaining adequate professional positions in the German labour market, resulting in higher unemployment and lower-status employment (BrückKlingenberg et al. 2007; Kogan 2011). Apart from issues related to the transferability of foreign skills and qualifications, the restrictive German policy of formally recognising foreign educational and qualification credentials resulted in problematic access to high-skilled employment sectors (Kogan 2012). While the diploma recognition policy was more generous for ethnic Germans with a simplified procedure explicitly mentioned in the BVFG as part of the labour market integration strategy, it was a particular problem for the Jewish migrant group. This is due to the very high percentage of individuals in this group with university degrees and a high proportion of medical, engineering, scientific, and art-related professions (Harris 1999; Schoeps 2005). The Jewish migrant group is also characterised by a high proportion of migrants over 50 years old who, in addition to the aforementioned labour market integration challenges, are faced with age-related labour market entry barriers (Haug 2005). Whereas the early stage of FSU ethnic Germans is characterised by relatively high unemployment among ethnic Germans, the data from Microcensus 2012 indicates a lower unemployment rate than the overall migration population in Germany. In the federal state of North Rhine-Westphalia (NRW) where the fieldwork for this study was conducted, 7.3% of ethnic Germans who arrived in Germany after 1990 were unemployed in 2012 as compared to 6% of the overall NRW population and 10.5% of the overall NRW population with migration background (MAIS NRW 2013). Male and younger (under 35 years old) ethnic Germans were more often unemployed than females and older aged cohorts (35-65 years old). Ethnic Germans are more often employed as manual workers and less often as clerical workers than both the overall NRW population and the overall

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NRW population with migration background. The proportion of employment in clerical work is considerably higher for younger migrants and female ethnic Germans. There is a lack of studies dealing with the current labour market situation of Jewish migrants and comparisons with the native or overall population in Germany (Liebau 2010). This is partly related to difficulties of identifying this particular migrant group in the available secondary data and official statistics. Recent comparative studies of ethnic Germans and Jewish migrants conducted by Mannheim University (e.g. Kalter & Kogan 2011; Liebau 2010) demonstrate that ethnic Germans enter the labour market quicker than Jewish migrants, and the unemployment rate is extremely high among Jewish migrants in the first years of their stay in Germany. However, Jewish migrants are more likely to enter higher-status occupations than ethnic Germans and ‘compromise higher‐status employment in favour of a quick entry into lower‐status jobs, other things being equal’ (Kalter & Kogan 2011: 13). Access to public welfare benefits facilitates their waiting for agreeable jobs (Cohen & Kogan 2007). With regard to their occupational status, they are currently better positioned than ethnic Germans. Several studies (Bauer & Zimmermann 1997; Koller 1997; Seifert 1996) show a positive effect of co-ethnic networks on labour market integration of ethnic Germans. In their quantitative study, Kalter and Kogan (2011) analyse the role of social networks for labour integration of FSU migrants. It shows that 79% of ethnic Germans and 61% of Jewish migrants in their sample who arrived in Germany between 1994 and 2005 had existing pre-migration contacts such as relatives and friends living in Germany. These were predominantly co-ethnic contacts. Social contacts, with both strong and weak ties, were important for labour market integration of both groups: 43% of ethnic Germans and 32% of Jewish migrants heard about their current job

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from (predominantly Russian-speaking) relatives, friends, or acquaintances. The study illustrates that having relatives and friends prior to migration enabled quicker labour market integration, regardless of migrants’ level of education. However, when it comes to occupational status, education and language skills are crucial for jobs with a higher occupational status. While pre-migration ties had a negative effect on higher-status job entry, contacts with native Germans had a positive effect.

3.4 Self-employment of the former Soviet Union migrants Empirical studies dealing with self-employment of FSU migrants are scarce. This is partly due to the relatively low self-employment rate among FSU migrants and the limited availability of representative data where this migrant group can be identified. Whereas the data on the self-employment rate of FSU Jewish migrants is not available, the self-employment rate of FSU ethnic Germans was estimated to be between 2-3% in the early 2000s (Leicht et al. 2005a). According to the German Microcensus (MAIS NRW 2013), the selfemployment rate of ethnic Germans who arrived in Germany after 1990 was 3.3% in 2012 in North Rhine-Westphalia (NRW). It was considerably lower than the self-employment rate of the overall NRW population (10.5%) and the overall NRW migrant population (10.1%). Self-employment is more common among male ethnic Germans and ethnic Germans over 35 years old, as compared to females and younger cohorts (MAIS NRW 2013). However, the proportion of self-employed females among self-employed ethnic Germans is considerably higher than in most other migrant groups and slightly higher than among the native self-employed (Leicht et al. 2005a; Leicht et al. 2009). The relatively small gender gap among self-employed ethnic Germans is interpreted as the result of a

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strong orientation towards full-time employment among FSU females — a legacy of Soviet employment policies, as well as a reaction to the disadvantageous position of female ethnic Germans in the German labour market (Leicht et al. 2005a). Although as German citizens, FSU ethnic Germans have fewer legal obstacles to self-employment compared to other migrant groups, and public support for self-employment among ethnic Germans is explicitly mentioned in the BFVG § 14, self-employment is not as common among FSU ethnic Germans as compared to most other migrant groups. The low self-employment rate is partially interpreted as a result of the lack of self-employment experience in the socialist home countries (Leicht et al. 2005a; Seebaß & Siegert 2011) and the unsuitability of professions common among FSU ethnic Germans for self-employment in Germany (Leicht et al. 2005a). In addition, FSU migrants are a relatively new group with regard to their duration of stay in Germany. The self-employment rate among migrants tends to increase with the longer duration of stay in the host country (Borjas 1986; Waldinger et al. 1990). A further increase in self-employment is therefore expected in the future and reflected in the current data of newly founded businesses (Metzgel 2014). Among the very few empirical studies that deal with self-employment of FSU migrants in Germany are the studies by Kapphan (2000), Leicht et al. (2005a), and Sommer (2008, 2011). Kapphan (2000) interviewed 60 self-employed FSU migrants in Berlin in 1997. The vast majority of his interviewees were Jewish migrants. Kapphan (2000) identified three market strategies among FSU businesses in Berlin. The first strategy consists of businesses that have a low financial and qualification entry barrier and are mostly oriented towards the local mainstream market with no specific function for the migrant community. Typical examples of these businesses are shoe repair, corner shops, clothes alteration services, and dry

3.4 Self-employment of the former Soviet Union migrants

61

cleaning. The business owners of this category see self-employment mainly as a possibility to ensure their own employment, improve their German language skills, attain additional skills, and become more familiar with German society. The second strategy was businesses that are part of the Russian-speaking migrant market, such as food, book, and video rental stores as well as various import and export businesses. This market strategy requires higher financial start-up capital than the businesses of the first category. Transnational contacts in home countries and social ties in the Russianspeaking migrant community are especially important for this strategy. This strategy is also characterised by a spatial concentration of business in one neighbourhood with a high proportion of Russianspeaking migrants (Berlin Charlottenburg), whereas businesses assigned to the other two strategies were distributed across the whole city. As Kapphan (2000) notes, there is an established Russianspeaking migrant economy in Berlin with a wide spectrum of offered goods and services, cultural facilities, Russian speaking media, and religious institutions. The third strategy consists of businesses directed towards a mixed market requiring specific qualifications. Such businesses typically include hairdresser salons, restaurants, and car repair facilities that target both migrant clientele and the host population. These businesses require financial start-up capital for equipment that is usually acquired in the migrant community, particularly through family circles. In the study conducted by Leicht et al. (2005), a name-based onomastic sampling was applied to identify businesses of FSU ethnic Germans in the business directory database. This resulted in 401 structured telephone interviews with self-employed ethnic Germans across Germany. The study provides an overview of business sectors and company characteristics common among self-employed ethnic Germans. It analyses socio-demographic characteristics of business owners and factors that influence self-employment of this particular migrant group. Compared to guest worker migrant groups,

62

3 Migrants from the former Soviet Union in Germany

self-employment in the gastronomic sector is very rare. Common self-employment sectors are trade (especially retail), knowledge-intensive services (high proportion of medical doctors), as well as household-oriented and personal services. Among the factors that foster self-employment among FSU ethnic Germans are a longer duration of stay in Germany, formal qualifications and education level, as well as industry experience as an employee prior to selfemployment. Pull factors, specifically the desire for better earning opportunities, are a more common motivation for self-employment than push factors. The most common mentioned push factor in the study is the threat of unemployment. Businesses run by FSU ethnic Germans are predominantly small companies with a high proportion of businesses without employees. Although the proportion of co-ethnic clientele is higher in businesses of ethnic Germans than in businesses of guest worker migrant groups, co-ethnic and especially family staff recruitment is less common. Further, 54% of the interviewed FSU ethnic Germans developed a written business plan and 64% sought professional advice before starting their business. These numbers are considerably higher than among guest workers migrant groups and native Germans. With regard to financial startup capital, common sources are personal assets followed by family loans, bank loans, and state business support programs. Family and friends are also an important source of non-monetary support in the start-up phase. In another study, Leicht & Langhauser (2014) compare the self-employment of different migrant groups which include migrants from Russia. Migrants from Russia only partly represent FSU migrants as a whole, and as country of birth and not migration status is the main differentiation criteria, this group includes ethnic Germans, Jewish migrants, and other migrants from Russia. The self-employment rate of this mixed group is 5%, which is still lower than among all other migrant groups in the study but higher than the self-employment rate of FSU ethnic Germans only. In contrast to the findings of

3.4 Self-employment of the former Soviet Union migrants

63

the aforementioned study of ethnic Germans by Leicht et al. (2005a), this study shows that the proportion of co-ethnic employment is the highest in businesses run by Russian migrants among all studied migrant groups: in 60% of businesses between 75% and 100% of employees were Russian-speaking migrants, and only 12% of businesses with employees did not have any co-ethnic employees. Businesses operated by migrants from Russia also have the highest numbers of co-ethnic clientele, with 35% of businesses having minimum 50% co-ethnic customers. There is also a positive correlation between knowledge-intensive business activities and the proportion of co-ethnic clients, which might be a response to demand for professional business-related services for a growing number of small businesses run by FSU migrants. Transnational contacts in the home country, on the other hand, are relevant for only for 23% of businesses, and transnational contacts in other countries are relevant just for 5% of businesses run by migrants from Russia. In the study conducted by Sommer (2008, 2011), 80 self-employed FSU migrants in Düsseldorf were interviewed face-to-face using a standardised questionnaire. The study provides a descriptive overview of FSU businesses in Düsseldorf. The sample was recruited using a combination of snowball sampling and searches in Russianspeaking print media and online portals. About 50% of the sample were Jewish migrants and 40% ethnic Germans, although the population of ethnic Germans in Düsseldorf is twice as high as Jewish migrants. This suggests that self-employment among Jewish migrants is more common than among ethnic Germans, but there are no reliable estimates of self-employment rates of Jewish migrants to confirm this assumption. The three market strategies identified by Kapphan (2000) among Russian-speaking migrants in Berlin are also present among FSU businesses in Düsseldorf. In addition, a small segment of transnational businesses mostly linked to the Russian-speaking economy was identified. Furthermore, there is a growing segment of high-skilled businesses, mostly run by younger

64

3 Migrants from the former Soviet Union in Germany

migrants, providing professional services (e.g. tax and legal consultations, Internet-related services) to the growing number of the Russian-speaking self-employed. Similar to findings by Leicht et al. (2005a), pull factors as a motivation for self-employment are more common than push factors. Most of the interviewed businesses were in the service sector, followed by the retail and crafts sectors. The businesses focus predominantly on the local and, to a lesser extent, the regional market. Businesses operating across Germany and transnational businesses are rare. One-third of the self-employed who were interviewed had predominantly co-ethnic clientele. Co-ethnic networks are an important source of financial loans, staff recruitment, and business-related information exchange. Family is central for financial support and practical help. Transnational contacts in home countries are relevant for just over half of the interviewed self-employed. The study demonstrates that there is a wellestablished, self-supporting Russian-speaking migrant economy in Düsseldorf with its own inputs and outputs and a wide range of offered products and services. All existing studies describing the self-employment of FSU migrants in Germany mentioned above conclude that FSU migrants mainly operate on the local market in Germany with no particular spatial or branch-specific concentration. Co-ethnic employment and family support are common, especially in the start-up phase. Despite the fact that a large proportion of FSU migrants have dual citizenship, which is favourable for transnational entrepreneurship, few FSU migrants have companies that use transnational business interactions as their central strategy. Sporadic temporary transnational entrepreneurial activities that are used as a complementary strategy are more common.

4 Study design and methodology This chapter describes the study design and applied methodology. It starts with a clarification of the definitions used in the study design followed by a justification for the study’s selected setting in both urban and rural areas. The rationale for the utilisation of a qualitative approach is provided in the subsequent section, followed by sections presenting the data collection procedures such as the sample’s selection and its overview, interviewing technique and interview structure, and an integrated network map data collection instrument. Information about the data analysis techniques applied in the study concludes this chapter.

4.1 Setting of the study and definitory remarks The empirical research of this study focuses on the business activities of FSU self-employed migrants in the urban area of Düsseldorf and the rural area of Oberbergischer Kreis (represented by Waldbröl), both located in the German federal state North Rhine-Westphalia. The study uses the broad Eurostat definition of self-employment, which describes self-employed individuals as persons who ‘work in their own business, professional practise or farm for the purpose of earning a profit’ (Eurostat 1999: 64) either full-time or part-time, with or without employees. The empirical part of the study refers to the self-employment of migrants born in the former Soviet Union excluding migrants arriving in Germany from the Baltic countries (Estonia, Latvia, Lithuania) after 2004 when these countries became European Union members.

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 E. Sommer, Social Capital as a Resource for Migrant Entrepreneurship, https://doi.org/10.1007/978-3-658-29141-9_4

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Despite the heterogeneity of the FSU migrant group in Germany as a whole, reflected in distinct private social networks within the general Russian-speaking community in Germany and the preference for contacts from the same subgroup, FSU migrants are studied together in this study for the following reasons. First, the opportunity structure for self-employment in the sense of the mixed embeddedness model does not strongly vary among Russian-speaking subgroups. Most FSU migrants arrived in Germany in a relatively short period of time in the 1990s and faced the same structural economic situation in the German labour market. Despite unrestricted legal labour market access and integration assistance granted to the vast majority of FSU migrants, they faced social and economic integration challenges during the mass migration from the FSU, characterised by high unemployment in the first post-migration years and professional displacement. Second, although FSU migrants in Germany are a heterogeneous group coming from different successor states of the FSU with diverse cultural, ethnic, religious, and socio-economic backgrounds, first-generation FSU migrants have some similarities due to their socialisation in socialist society as well as the influence of Russian culture and use of the Russian language. According to Dietz (2000: 643), FSU migrants in Germany are ‘deeply influenced by the culture, society and economy of the (post) Soviet Union’ (Dietz 2000: 643). Most FSU migrants in Germany are Russian speakers and the Russian language is used as the lingua franca in the FSU migrant community, including the FSU migrant economy, which is, therefore, usually referred to as a Russian-speaking migrant economy. In the study by Rodgers et al. (2019) that looks at transnational networks of the FSU migrants residing in the UK, one of the findings demonstrates that entrepreneurs with FSU migration background relied on “co-migrant” rather than co-ethnic networks that went beyond the particular country of origin and ethnicity. The network membership in the wider Russian-speaking community was based on similar

4.1 Setting of the study and definitory remarks

67

standing in the society such as being a migrant in the UK and sharing a language as well as Soviet past. Despite distinct private social networks among different subgroups of the FSU migrants in Germany, there is a shared Russian-speaking infrastructure (Russian-speaking migrant market, media, cultural and educational organisations, etc.) that is used by all subgroups and provides a meeting and interaction platform for Russian-speaking subgroups (Beetz & Darieva 1997; Sommer 2008). This shared Russian-speaking infrastructure is particularly important for the selfemployed serving the migrant market. Despite social segregation of subgroups within the FSU community, the study by Sommer (2008) did not observe obvious separation of businesses and clientele between different Russian-speaking subgroups in the sense of internal ethnicity (Light et al. 1993). In line with the conceptual suggestion implied in the mixed embeddedness approach to analyse migrant entrepreneurship taking into account the local, regional, and national context (Kloosterman & Rath 2001), the study design assumes that local structural context has an impact on social integration of migrants in general and on the development potential of migrant businesses in particular (Rekers & Kempen 2000). The study by Schunk and Windzio (2009) analysing the German Microcensus data, for example, demonstrates that a higher urbanity level (cities with more than 500,000 inhabitants) significantly increases self-employment among migrants. However, this is not the case for populations without a migration background. Furthermore, localities in the same country differ with regard to their economic growth potential, educational opportunities, labour market chances, and national and international reputation, as well as the level of social, demographic, political, economic, and cultural diversity that are relevant for incorporation paths of migrants on local levels (Glick Schiller & Çağlar 2007). These factors can also impact one’s decision to start a business, potential

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market opportunities, and access to and the quality of available social capital (Räuchle & Schmiz 2019). To integrate the local context perspective in the study, two contrasting areas with a relatively high proportion of FSU migrants were chosen as fieldwork areas. The greater area of Düsseldorf is an example of an urban area with presence of different migrant groups and a high degree of economic, cultural, ethnic, and social diversity. Of a total of approximately 600,000 persons living in Düsseldorf in 2010, about 20,000 were migrants from the three main countries of origin (Russia, Ukraine, and Kazakhstan) of FSU migrants in Germany (Landeshauptstadt Düsseldorf 2012). Düsseldorf has a diverse Russian-speaking migrant community consisting of FSU ethnic Germans, Jewish migrants, international students from FSU countries, and other FSU migrants. About 8,000 Spätaussiedler from the FSU countries were allocated to Düsseldorf between 1990 and 2010 (Landeshauptstadt Düsseldorf 2012). The Düsseldorf Jewish Community (Jüdische Gemeinde Düsseldorf) is the largest in North Rhine-Westphalia and the third largest in Germany after Berlin and Munich. About 90% of its approximately 7,000 members are FSU migrants3. Düsseldorf has a well-established Russianspeaking migrant economy with its own infrastructure and diverse array of Russian-speaking services (Sommer 2008). The large number of FSU migrants in Düsseldorf and the city’s advantageous geographic position with good train connections to other municipalities in the region offers a favourable opportunity structure for the development of the Russian-speaking migrant economy there. The number of potential clients is even higher if Russian-speaking migrants from other FSU countries in Düsseldorf as well as FSU migrants living near Düsseldorf are considered.

3

Source: https://jgd.de/geschichte/ (retrieved on 15.08.17).

4.1 Setting of the study and definitory remarks

69

Compared to other migrant groups in Germany, FSU ethnic Germans are characterised by a stronger residential preference for rural areas (Harris 1999; Wenzel 1999). Although the Wohnortzuweisungsgesetz (legislation assigning FSU migrants to municipalities) aimed at preventing high spatial concentration of FSU migrants in certain areas, some rural areas like Oberbergischer Kreis or Cloppenburg (Geiling et al. 2011) resulted in a relatively high concentration of FSU ethnic Germans, partly because a large number of migrants settled there before 1996 when the policy was introduced. Waldbröl, a municipality located in Oberbergischer Kreis in North Rhine-Westphalia, is an example of a rural area with a high proportion of FSU ethnic Germans accounting for about 15% of the whole population (approx. 3,000 of about 20,000 residents4). The migration of ethnic Germans to Walbröl was supported by Horst Waffenschmidt, Commissioner for Ethnic German Immigrants of the Federal Government from 1988 until 1998 and resident of Waldbröl. A large integration centre where ethnic Germans spent several weeks or months after their arrival in Germany was located in Waldbröl, and many families decided to stay in the region after their integration program ended. Waldbröl is an example of an area with a clear dominance of a single migrant group and spatial segregation in particular neighbourhoods. In Waldbröl’s Eichen neighbourhood, where until 1999 the integration centre for FSU migrants was located, ethnic Germans comprise the majority of the residents. A respondent who migrated to Waldbröl with her family as a child in the early 1990s and barely speaks Russian but has mostly ethnic German friends said: ‘In my class at school, for example, there were 20 Russian Germans and only 2 or 3 native Germans’ (Int. 54, W, flower shop owner, female,

4

Source: https://www.waldbroel.de/waldbroel-portrait/geschichte/ (retrieved on 15.08.17)

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27). Several respondents from Waldbröl also mentioned that they met people that they already knew in their country of origin, as was mentioned by a food shop owner: I know many people here who used to live in the same village as us. They are also here in Waldbröl now. And we used to be in the same class at school in Russia. They are also here which is kind of funny. It is a little Moscow here. (Int. 52, W, food shop owner, male, 34) A high proportion of co-ethnics in the same geographic area as well as pre-migration existing social ties might have an impact on use of intra-community social capital for self-employment and access to business-related networks outside the co-ethnic community. The two contrasting areas (urban vs. rural) were selected to explore the potential impact of local opportunity structure on the decision for the market strategy in general and on the use of social capital for self-employment in particular.

4.2 Qualitative approach Although contemporary social network analysis is mainly dominated by quantitative approaches, some of its roots go back to the qualitative tradition (e.g. pioneer studies by Bott [1957] and Young & Wilmott [1957]). The growing number of mixed-method and qualitative social network studies has been partly fostered by debates among proponents of relational sociology (e.g. Emirbayer 1997; Crossley 2011) on problematic aspects of quantifiable measures of social capital as well as the limitations of quantitative approaches in showing how individual action and social relations mutually influence each other (Emirbayer and Goodwin 1994; Crossley 2010).

4.2 Qualitative approach

71

Qualitative approaches, especially as part of a mixed method research design, have proved to be fruitful in exploring the contextualised nature of social relations (Bellotti 2016) and network influence on decision making (Heath et al. 2009) as well as detecting dynamics and temporal changes (Hollstein 2011; Uzzi 1997). According to White (1992), networks are constructed and are subject to dynamic processes, which are reflected in the ‘stories’ behind the ties where ‘(n)etwork is a verb, and we tell stories in network terms’ (White 1992: 66). Bidart and Lavenu (2005: 360) also note that ‘personal networks have a history’, and thus, the ‘form and structure they show today result from a construction elaborated over time’. ‘Temporal turn’ (Thomson & McLeod 2015) in social sciences has contributed to a growing interest not only in structural changes of networks over time but also in stories behind these temporal changes which can be best studied with qualitative approaches or mixed methods (Ryan & DiAngelo 2017). In addition to temporal aspects, qualitative approaches are also suitable for studying spatial aspects of migrants’ access to different forms of capitals (Umut & Ryan 2018). To sum up, qualitative approaches are especially appropriate for analysing content, accessibility, and dynamics of social networks (Hollstein 2011) — the main research aspects of this study. Although qualitative methods are still generally underutilised in social network research, according to Ryan & D’Angelo (2018), the ‘cultural turn in network research has created more opportunities for qualitative approaches to understanding the construction and meaning of inter-personal ties (Knox et al., 2006)’. According to Bellotti (2016), qualitative approaches also have certain advantages at the level of data interpretation as they allow for ‘observation of emerging themes that were not explicitly addressed in the data collections’ (Bellotti 2016: 15). Another advantage of qualitative methods is that ‘open, less structured procedures of data collection and interpretive approaches in data analysis are in order in cases where

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we expect context and actor’s strategies to play a crucial role in determining network impact and network dynamics’ (Hollstein 2011: 408). Apart from the advantages of qualitative approaches mentioned above, there is no secondary data available on business networks of FSU self-employed migrants and this topic has not been studied before. This study is exploratory in nature and qualitative approaches are specifically suitable for exploration of network and network practices (Hollstein 2011). Consequently, a qualitative approach was chosen for the study. Data was collected via interviews. Qualitative interviews are ‘a useful way of becoming familiar with the field under study (exploration)’ and ‘the first choice in studying actors’ networking strategies’ (Hollstein 2011: 411). A semi-structured problem-centred interview (Witzel 2000) research method was selected because it combines deductive and inductive elements of data collection and is oriented towards a specific problem-centred theme, which is especially suitable for interviews under time constraints (as in case of busy entrepreneurs).

4.3 Sample The sample unit in this study is self-employed individuals born in the former Soviet Union running their own small businesses in the Düsseldorf5 region or Waldbröl area6. There is no accessible representative register of businesses from which a random sample of

5 6

Regierungsbezirk Düsseldorf: consisting of Düsseldorf itself and 14 neighbouring districts and municipalities. Including neighbouring villages.

4.3 Sample

73

FSU self-employed migrants could be drawn7. Purposive sampling (Flick 2008; Patton 2002) was applied to explore a diversity of factors that might have an impact on networking practices and use of social capital for self-employment. In the sense of maximum variation sampling (Patton 2002), in order to maximise the diversity of networking strategies in the data, the goal was to select respondents with diverse attributes representing dimensions relevant for the conceptual framework and the research goal of the study. These main dimensions are: different market segments (migrant market, mixed market, mainstream market)8; businesses in different development stages (start-ups and established businesses operating for more than 5 years as well as ‘failed’ or ‘given up’ businesses); and different levels of required skills (low/middle-skilled vs. high-skilled). Table 1 demonstrates the applied grid with the number of achieved interviews in each cell. As can be seen from the table, it was not possible to find respondents for each grid cell in the ‘Failed/Given up business’ category mainly because such respondents are particularly difficult to identify. Apart from that, the table does not include four additional respondents involved in transnational businesses (three failed businesses and one start-up business) as their businesses were oriented towards the market abroad and did not fit into the migrant market/mixed market/mainstream market local/national categorisation.

7 8

Most FSU migrants have German citizenship and cannot be identified in available registers. A market is considered to be a migrant market in this study if the majority of clients (more than 50%) are co-ethnics. Mixed market is classified as having a substantial proportion of co-ethnic clients between 10% and 50%, and mainstream market has either no co-ethnic clients at all or a very small proportion of less than 10%. As it was not possible to quantify the exact proportion of clients’ ethnic background in this qualitative study, the categorisation is mainly based on respondents’ reported perceptions.

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Table 1: Sample grid applied in the study

Start-up (less than 5 years at the market) Established (5 or more years at the market) Given up selfemployment Total

Mixed market (between 10% and 50% co-ethnic clients)

Mainstream market (less than 10% co-ethnic clients)

Low/ Middleskilled

Highskilled

Low/ Middleskilled

Highskilled

Low/ Middleskilled

Highskilled

12

4

2

2

5

6

29

6

2

6

5

6

1

28

1

0

0

1

1

1

4

19

6

8

8

12

8

61

25

16

Total

Migrant market (more than 50% co-ethnic clients)

20

Note: Total number of all respondents in the study is 65 but the table excludes four cases of transnational businesses (three failed and one start-up) that did not fit into any of the grid cells in the table because they were oriented towards the market abroad. The table only illustrates the main business at the time point of the interview (or the last business before giving up self-employment) and does not take into consideration multiple businesses, former businesses, as well as changing market strategy over time.

To ensure the heterogeneity of the sample in the sense of grounded theory (Glaser & Strauss 2007), the interviews were conducted in

4.3 Sample

75

three batches whereby the selection of participants was guided by concepts that emerged from initial data analysis of previous interviews (e.g. as the result of initial coding of the first batch of interviews it was decided to enlarge the sample with respondents involved in multiple and transnational businesses as well as respondents who switched from one market strategy to another one) until the theoretical saturation was achieved and no new properties of the sample pattern emerged (Glaser 2001). Inclusion of the following aspects proved to be relevant to achieve maximum variety of the sample: different subgroups of FSU migrants (ethnic Germans, Jewish migrants, other FSU migrants); different gender and age groups; different market sectors (trade, craft, services); degree of involvement in transnational economic activities; and involvement versus non-involvement in multiple businesses. As purposive sampling involves the researcher’s personal judgement to select sample units to answer the research questions, knowledge of the subject is essential for the sampling procedure. To quote Rapley (2014: 50): Irrespective of the approach, sampling requires prior knowledge of the phenomenon. Knowledge is essential in order to establish how ‘typical’ your sample is of the phenomenon alongside understanding the potential diversity, or variance, within the phenomenon. The first stage of the sampling procedure was guided by previous knowledge of the subject and target population. In this way, in addition to the literature review done prior to fieldwork, the author was also informed by her previous work on the subject of self-employment among migrants in general and self-employment among FSU migrants in particular. Although ethnographic methods are not at the core of this study, participant observations (Lüders 2000) such as attending of Russian-speaking events and seminars for start-ups or visiting shops run by FSU migrants as a client helped the author to

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gain general empirical knowledge about the studied subject and to get access to potential respondents for her study. The characteristics included to achieve maximum variation in the sample were guided by theoretical concepts and empirical findings from relevant studies. Most studies demonstrate reliance on intracommunity ties in the start-up stage but move away to inter-community ties in the later development of the business. Therefore, startups and established businesses were included in the sample. Different strategies were used to identify and contact potential respondents. Through research and fieldwork conducted for her previous studies, the author was familiar with potential channels for approaching self-employed FSU respondents for the study, such as relevant Russian-speaking print media and Internet portals, existing contacts with relevant migrant organisations, and events where FSU self-employed individuals could be approached. These channels were especially fruitful for direct approach and recruitment of respondents in the migrant market and to some extent in the mixed market in Düsseldorf. In Waldbröl, potential respondents were often directly approached in the shops that were known to have FSU owners through information provided by the author’s personal contacts in the region. Further, the snowball method was applied both in Düsseldorf and Waldbröl. Contacts of some respondents that participated in the previous study for the author’s master thesis resulted in five new interviews in Düsseldorf for this study. The author’s personal intra-community links in the Russian-speaking migrant community (the author is herself a FSU migrant) were also useful in recruiting respondents directly or through referrals and were particularly helpful for finding respondents who gave up self-employment as well as for identifying self-employed FSU migrants in the mainstream market as these respondents usually do not advertise their business in the Russian-

4.3 Sample

77

speaking print media and Internet portals, and it is difficult to identify them through publicly available channels like phone directory or business lookup databases. Aside from potential respondents that were contacted via email (such requests were mostly ignored), those who were approached in person or by telephone rarely refused to participate in the study. No incentives were offered for participation in the study. Although self-employment can be perceived as being a sensitive topic by some respondents (e.g. Vinogradov 2011 on ethical aspects of migrant entrepreneurship research), especially if informal practices are involved, most contacted respondents were eager to participate in the study and did not express concerns. It is, however, important to reflect upon the interviewer’s and interviewee’s identities (Wengraf 2001) as well as author’s ‘intersectional position in the field’ (Carstensen-Egwuom 2014: 270) as it affects how the relationship between the interviewer and the respondent is established and maintained as well as how the field is ‘accessed, addressed and hereby co-produced’ (Carstensen-Egwuom 2014: 270). Being an FSU migrant academic might have enabled the author a relatively privileged access to interviews with the target group. In the sense of principled motivation of ethnic solidarity, it is possible that respondents were more willing to support the co-ethnic author. Respondents often used such phrases as ‘our people’, ‘as you know’, ‘we’, and ‘our community’ in the interviews, referring to collective identity and emphasising the author’s inclusion as ‘one of us’. Interestingly, the author was rarely asked to which subgroup of FSU migrants she belongs. Third-party referrals were helpful to foster trust and willingness to participate among the approached respondents. Individuals who were previously self-employed but gave up their businesses were included in the sample to explore the potential impact of social capital on business failure. It was not possible to find

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respondents from this category in Waldbröl due to difficulty in identifying them. However, some of the interviewed entrepreneurs in Waldbröl and Düsseldorf reported their ‘failed’ experiences with other businesses in the past and this information could be used to explore the issue of ‘failure’. In Düsseldorf, respondents who gave up their self-employment were recruited through referrals by the author’s personal contacts in the FSU migrant community. While it was possible to recruit respondents from different FSU subgroups in Düsseldorf to explore potential effects of internal ethnicity (Light et al. 1993) on self-employment strategies, only FSU ethnic Germans were recruited for the interviews in Waldbröl as this subgroup is clearly dominant there and the number of migrants from other FSU subgroups is very low. Furthermore, only the low/middle-skilled sector is represented in Waldbröl as it was not possible to identify businesses in the high-skilled sector. This could be partly due to the rural aspect with the tendency of younger high-skilled migrants moving to urban areas. The sample in Waldbröl also differs from the sample in Düsseldorf with regard to respondents’ time point of migration in Germany: respondents in Waldbröl migrated to Germany earlier than most respondents in Düsseldorf. Most respondents in Waldbröl migrated to Germany before the fall of the Soviet Union, and all respondents migrated before 1996 when the legislation assigning a place of residence upon arrival (Wohnortzuweisungsgesetz) was introduced. In total, 62 interviews (52 in Düsseldorf and 10 in Waldbröl) with 65 self-employed or formerly self-employed FSU migrants were conducted for this study between September 2011 and December 2012. Most respondents (53 persons) were full-time self-employed, while six respondents combined self-employment with education activities and another six respondents with paid employment. The overview of main characteristics of the sample is provided in Table 2.

4.3 Sample

79

Table 2: Overview of the sample Düsseldorf N=55

Waldbröl N=10 Total N=65

Business status Start-up

27

3

30

Established

21

7

28

7

0

7

23

2

25

Mixed market

10

6

16

Mainstream market

18

2

20

4

0

4

Low/Middle-skilled

31

10

41

High-skilled FSU migrant subgroup

24

0

24

Ethnic Germans

21

10

31

Jewish migrants

25

0

25

9

0

9

Male

37

6

43

Female Respondent’s age

18

4

22

> 35 years old 35 - 50 years old

21 23

4 5

25 28

< 50 years old Time point of migration

11

1

12

Given up Market strategy Migrant market

Transnational market Required skill level

Other FSU migrants Respondent’s gender

Before 1991

6

7

13

Between 1991 and 2000

43

3

46

After 2000 Other relevant aspects

6

0

6

Without staff or co-owners

18

2

20

Transnational activities

34

3

37

Multiple businesses 13 3 16 Note: The table only reflects the main business at the time of the interview (or the last business before giving up self-employment).

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4.4 Interviews Semi-structured problem-centred interviews (Witzel 2000) were held with the respondents. This type of interviewing was chosen because it combines deductive and inductive elements of data collection and it is oriented towards a specific problem-centred theme, which is especially suitable for interviews under time constrains (particularly for busy entrepreneurs). According to Hollstein (2011: 409): The “soft” approach employed in qualitative interviewing sometimes may be the best (or only) way of obtaining information from certain populations. The advantage of less structured interviews is that in contrast to standardised questionnaires they to a greater extent resemble “normal communication”. Moreover, they can easily be adapted to the respective interviewee and the demands of the situation at hand. This can be crucial for being able to obtain network information for some populations at all, for instance, because they are greatly pressed for time (e.g. politicians), their activities are illegal (e.g. mafia, drug addicts), or they are in danger (e.g., human rights activists under authoritarian regimes). Although there is a set of prepared questions that guide the interview, the method allows for adjustments that occur in the interview as a result of the interaction of the interviewer and the respondent as well as a result of respondents’ understanding of the questions and their willingness to talk about specific topics. At the same time, the semi-structural character of the interviews allows to integrate theoretical concepts relevant for the study. Reporting about past events, respondents provide a retrospective narration from the perspective of the current situation. A combination of person-oriented and task-oriented interviewing behaviour (Gorden 1987) was applied in the study to achieve rapport and warm interviewing style

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involving trust and reciprocity by showing empathy, while at the same time keeping track of the interview structure and gathering relevant information. Interviews lasted between 16 and 216 minutes. On average, an interview lasted for about 50 minutes. They were conducted in Russian (49 interviews) or German (13 interviews), depending on the respondent’s language preferences, and then transcribed. Interviews were recorded with the respondent’s approval. Fifty-three interviews were conducted face-to-face and nine interviews were conducted on the telephone to accommodate hard-to-reach respondents (e.g. ‘failed’ self-employed, mainstream market businesses, high-skilled professionals such as lawyers or medical doctors). Most face-to-face interviews were conducted in the business premises and in public spaces (e.g. cafes). In six cases the interview was conducted at the respondent’s home (these were either ‘failed’ businesses or entrepreneurs who do not have offices). With the exception of two interviews where the wives of the respondents were present during the interview and one group interview, all interviews were conducted alone with the respondent (although there were short interruptions in a few interviews, e.g. to take a phone call or if someone else entered the office). One unplanned group interview emerged spontaneously during the fieldwork. The author arranged an interview appointment with one respondent but when she arrived to the interview, it turned out that the respondent had invited three other self-employed persons willing to take part in the study to join the interview. The four respondents in this group interview were instructed to answer the whole set of questions one after another but as all four were present in the room at the same time some interruptions in form of questions and comments by the others resulting in small discussions were unavoidable. Apart from that, there is a possible effect of presence of others on provided information. Despite these issues, the interview proved to be a rich source of valuable data and it was decided to include it in the study.

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To develop rapport by encouraging respondents to start the interview by talking freely about their experience rather than answering questions in a question-answer style, and thus partly to co-determine the interview development, the interview started with a narration-generating request asking the respondents to tell their self-employment story: I am interested in your personal self-employment story. How did this come about? What did you do before that? How did your business develop over time? What are the things you consider important in relation to your self-employment? I will not interrupt you at first but I will take some notes so that I can revisit some of the things you mentioned. After that followed a set of questions from the semi-structured interview guide which covered the following themes (see Appendix A for the detailed interview guide):  



Education and employment history, labour market experience in Germany, previous self-employment experience Questions about business (when was it founded, preparations before starting the business, difficulties in the start-up stage, support received in the start-up stage, co-owners and employees, staff recruitment channels, target clientele, client acquisition channels, advertisement channels, cooperation with other businesses and organisations, current difficulties and support, changes in the development of the business over time, expected future development) Advantages and disadvantages of the location (urban vs. rural)

4.4 Interviews 

  

83

Business network (search for and access to business-related contacts, contact strategies, providing support and advice to other self-employed, intermediary role, reciprocity, conflict situations) Private (not business-related) social environment and transnational social contacts Network map data collection (see section 3.5, Network Maps) Demographic questions (year of migration to Germany, country of origin, age, citizenship, FSU migrant subgroup)

The interview guide served as an instrument to remind the interviewer about the topics to be asked during the interview rather than a questionnaire that would be strictly followed. The phrasing of questions and their sequence could vary depending on what the respondent had previously stated in the interview. Respondents did not tell their story necessarily in the same structured way as the researcher planned the interview. For example, they sometimes mentioned events and experiences that were supposed to be asked about later in the interview which required some degree of flexibility in terms of question order. They also sometimes mentioned topics that were not included in the planned interview but turned out to be important in the context of a particular interview. Additional questions could be asked as well, especially if the interaction required clarification. Generally, most respondents were open about their experiences and provided detailed information on different aspects of their self-employment. Some participants even shared relatively sensitive information, for example about informal practices they are applying or have previously applied, or were open about their desired social distance to natives or other migrant groups including other FSU subgroups.

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4.5 Network maps In addition to the qualitative data collection, weak structured and standardised network data collection using personal network maps (Gamper et al. 2012; Herz et al. 2015) consisting of a respondent (ego) and actors who are linked to the respondent’s business activities (alters) was integrated in some of the interviews (16 in total). The procedure of the network map data collection started with the name generator: “Could you please tell me the names or initials of those who are important for your self-employment?”. The initials were put in an empty circle on a paper sheet (see Figure 2 for an example from the study). Then a set of standardised name interpreters was asked about attributes of each alter in the circle such as gender, age, ethnicity, place of residence, profession, type (family and relatives, friends, acquaintances, business only) and duration of relations with the alters, and their function for respondent’s, and the information was entered in the name interpreter table by the interviewer (see Appendix B). The procedure was followed by filling in the alter-alter relationship matrix to collect information about the relationship between the alters. To explore the meaning attached to social ties as well as potential access barriers to certain types of social capital and strategies of overcoming those barriers, respondents were asked additional questions about particular alters in their business network. In general, the result of this exercise was a history of the current personal business network based on narratives from the ego-centred perspective of the respondent. Unfortunately, a systematic comparative analysis of collected network data in the sense of structural network analysis was not feasible to implement in this study as network maps are only available for a small number of interviews who were willing to participate in the network map data collection exercise. Therefore, the network maps were mainly used for illustration purposes of case examples.

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They were designed following the concentric circle diagram approach by Kahn and Antonucci (1980) using the software application VennMaker based on the data collected during the interview, with a specific focus on social closeness between the ego and the alter presented in concentric circles (family, friends, acquaintances, purely business relationship) as well as migration and national background of the alters presented in sectors (FSU migrants, natives, other migrants, transnational ties). Figure 3 demonstrates an example of the produced network map for the case illustrated in Figure 2. Figure 2: Example of network circle from an interview with an IT specialist (Int. 2, mainstream market, Düsseldorf, male, 24)

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Figure 3: Example of a network map from an interview with an IT specialist (Int. 2, mainstream market, Düsseldorf, male, 24)

Although initially this additional method of data collection was planned as a supplementary method in the sense of a mixed-methods embedded design (Hollstein 2014), it was not possible to implement it in practice in all interviews due to the respondents’ time constraints or their reluctance to participate in such an exercise. The network map data collection was integrated towards the end of the interview. It is possible that the respondents’ desire to participate in the network data collection would have been greater had it been

4.5 Network maps

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integrated at the start of the interview. Network data ‘involves sensitive and sometimes even delicate data’ (Hollstein 2011: 409), especially if respondents are asked to provide information not only about themselves but also alters in their network (Hollstein 2011). The ethical issues of using network maps are discussed by Ryan et al. (2014) and D’Angelo & Ryan (2019). Some respondents indeed refused to draw their network maps because they had concerns about sharing too many personal details. Being familiar with the purpose of the research project and having experience in answering questions previously might have been helpful in generating trust between the respondent and interviewer before moving on to more sensitive questions. Therefore, the network map exercise was performed towards the end of the interview. Some respondents also refused to draw their networks because they found the task cognitively challenging. Further, it was not possible to integrate this approach in the telephone interviews. While implementing the network map data collection approach, some of its limitations emerged. Personal network data is usually based on the perspective of the respondents (Jack & Anderson 2002). First, the number of alters perceived as important for business considerably varies between respondents. If only the network map data is taken into consideration, it may lead to a false impression that the respondents with a lower number of named alters have less social capital. Some challenges of defining boundaries in qualitative social network studies are discussed by Heath et al. 2009. The number of alters named by respondents depends on their willingness to reveal and to recall all members of their network. Furthermore, the number of named alters can be biased by the respondent’s subjective perception of who they consider to be important for their business (e.g. some network members can be overlooked) and their understanding of the network map instrument.

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When linked with the interview data, it becomes clear that the success of the business and the support received overall is not necessarily linked to the number of actors in the network. Second, respondents name both individual actors as well as corporative actors or groups of actors, which results in a network consisting of different entity ties (individuals, groups, organisations). The relationship between the respondent and the named actor can also take many forms. In other words, it can be economic as in the case of the relationship with customers and suppliers, or non-economic relationships such as those with supporting family members and friends or institutions that provide information. Third, as personal networks cannot be perceived as clearly bounded and a static entity (Crow 2004), another main challenge is related to depicting the networks’ dynamic aspects on a static map. The network’s dynamism is important for studying migrant entrepreneurship, as there is empirical evidence (Panayiotopoulos 2006; Rusinovic 2006; Waldinger et al. 1990) that supporting networks change depending on the stage of business development. Intracommunity and family support is particularly relevant in the start-up stage (Sanders & Nee 1996) but other sources of social capital become increasingly relevant for business expansion (Sequeira & Rasheed 2006). As business development is a dynamic process, asking respondents to draw their current network at the time point of the interview would result in a static cross-sectional snapshot of a particular time point leaving out information about other support sources that were important at earlier stages of business development, which became less relevant over time. The temporal changes would not be depicted in the network map unless the information was collected over time in a longitudinal manner. A possible solution to this would be to ask respondents to draw network maps for different time points from the start of the business. This approach was tested in one of the interviews in this study (see Section 7.4) and

4.6 Data Analysis

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proved to be more suitable for exploring changes in network compositions and market strategies over time. This approach, however, is more time consuming and it relies on the respondent’s ability and willingness to recall the network in the past. Despite the aforementioned limitations, the network map approach proved to be a useful tool for generating discussions (see e.g. Herz et al. 2015) and case illustrations when designed and tested before implementation in the field. Combined with interview data, it can be a rich source for data analysis when integrated in a mixed-methods research design (Bellotti 2015; Bilecen 2016; D’Angelo & Ryan 2016). 4.6 Data Analysis Description, analysis, and interpretation are the three main elements of qualitative data analysis (Wolcott 1994). The analysis techniques applied in this study were selected to address the complexity of the data that reflects the maximum variation sampling approach. In the first step, a standardised summary table for each interview was produced, providing an overview of the main characteristics (key themes in the interview and demographics), concluded by a short case summary. This procedure helped unpack the data which was necessary to manage the large amount of interviews stemming from the fieldwork and which resulted in about 700 pages of transcriptions. The systematic overview table also helped grasp each interview case as a whole and explore differences between cases before going into a deeper analysis of the interview data. During the interviews, the author was confronted with the challenges of dealing with multiple businesses. Respondents often reported on their former self-employment that they either gave up or moved on from it to different markets, for example from transnational to local

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or from migrant to mainstream. To reflect this dynamism, it was decided that the unit of analysis should be a particular business activity rather than the entrepreneur or current business. If sufficient information was given about several businesses, including previous businesses, businesses were treated in the analysis as separate units and each of them was assigned to a market strategy category (migrant market, mixed market, mainstream market) and was included in the sample for this particular market category. Therefore, the numbers in the tables in the chapters on particular market strategies do not exactly correspond with the numbers in the sample overview table in this chapter, as only the current main business at the time point of the interview (or the last operating business) is presented in the sample overview table, while tables in the market sector chapters also include past and multiple businesses. In the second step, the interview transcripts were analysed with a qualitative content analysis method (Hsieh & Shannon 2005; Mayring 2000, 2004; Schreier 2014). This method was implemented for its flexibility in combining deductive and inductive codes in the coding frame, which is matched to the material and serves as an analytical construct applied to data (Schreier 2014). The coding frame was designed as a mixture of concept-driven codes based on the literature review and data-driven codes. Initial open and subsequent focus coding (Charmaz 2006) were used as techniques to produce the coding frame. In the first step, the initial coding frame was designed for analysis of several interviews from different subgroups in the sampling grid to reflect the data diversity until a point of saturation was reached and no new concepts emerged. In the second step, focus coding was applied to revise and refine the initial coding frame by focusing on codes that are relevant for the research questions and some of initial codes and categories were recoded. After revising the coding frame, the finalised coding frame was applied to the remaining data. MaxQDA software was used to organise and manage the data.

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In the third stage of data analysis, empirically grounded types (Kelle & Kluge 2010; Kluge 2000) of migrant entrepreneurial activities with the main focus on networking were derived. The empirically grounded construction of types technique suggested by Kluge (2000) consists of four steps. It starts with the development of relevant analysis of dimensions that arise from the empirical data and theoretical knowledge. Then the cases are grouped and empirical regularities are analysed, as are the meaningful relationships between attributes and type construction. The characterisation of the constructed types was performed in the last step. The goal of types construction was to identify the types of entrepreneurial activities with attributes as similar as possible within a type, and possibly strong differences between types (internal and external heterogeneity [Kluge 2000]). The construction of types by combining selected attributes and their dimensions enables the systematic reduction of a rich variety of case-specific data to few relevant types based on empirical regularity, theoretical knowledge, and analysis of meaningful relationships. At the same time, this method encourages the use of case-specific examples for explanation and illustration of the constructed types. As a different typology was constructed for different empirical chapters, the attributes that served as a base for type construction are described and explained in the respective chapters. The interview data was analysed in the original language in which the interview was conducted — either German or Russian. The quotes used in this study were translated into English by the author following the ‘maximum proximity to the original meaning’ approach resulting in varying degrees of adaptation. In the quotes, (italic) is used for the author’s clarifications and […] for omitted text in the cited excerpts. Basic information about the respondent is provided in the brackets at the end of the quote - for example, (Int. 54, W, flower shop owner, female, 27) – and includes interview number,

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interview place (‘D’ stands for Düsseldorf sample and ‘W’ stands for Waldbröl sample), business activity, gender and age. All names in the quotes were changed for anonymity reasons. In addition to quotes, case illustrations are used to present the data. Each empirical chapter provides one or two case illustrations using the network maps collected during the interviews. Only interviews in which network map data collection was implemented were considered for the aforementioned case illustrations.

5 Russian-speaking migrant market This chapter deals with economic activities of FSU migrants that can be broadly classified as enclave economy businesses. Businesses assigned to this market category have predominantly co-ethnic clientele (Kloosterman 2010). The chapter starts with the definition of enclave economy developed in the early migrant entrepreneurship research (e.g. Wilson & Portes 1980, Zhou 1992), as the Russianspeaking migrant market shares some important characteristics with this concept. After this introduction, the development of the Russianspeaking migrant economy in Germany and main characteristics of the Russian-speaking migrant market in Düsseldorf and Waldbröl are outlined. An overview of the interviewed businesses assigned to the migrant market strategy is followed by a data-driven classification of these businesses in four categories, with the main characteristics of their offerings, clientele, and business-related social ties emphasised. Motivations to start a business in the migrant market are presented and discussed next, followed by an illustration of characteristics and functions of social capital for the self-employed in the migrant market. Consequently, client recruitment strategies are outlined followed by a discussion of business-related relationships. Two examples of migrant market business networks and a short summary conclude the chapter.

5.1 Enclave economy in migrant entrepreneurship research Enclave economy (also commonly labelled as ethnic niche) is a special case of ethnic economy primarily serving an associated co-ethnic community that is ‘bounded by an identifiable ethnic community and embedded system of community-based coethnic institutions © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 E. Sommer, Social Capital as a Resource for Migrant Entrepreneurship, https://doi.org/10.1007/978-3-658-29141-9_5

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and coethnic social relations’ (Zhou & Cho 2010: 87). Especially in early development phases of ethnic economy, migrants start businesses targeting co-ethnics as clients and employees. On a migrant business continuum, ‘migrant market - mainstream market’ ethnic enclave is one of the two end points marking businesses that are entirely embedded in the milieu of a specific migrant community (Nee et al. 1994). Drawing on dual labour market theory, Wilson & Portes (1980) see enclave economy as an alternative sub-economy offering a protected labour market sector for an identifiable ethnic community. Enclave economy is characterised by co-ethnic social business relations (co-ethnic owners, employees, customers, suppliers, and business partners) and observable institutions (Zhou 2004). It mainly serves co-ethnic clientele providing the migrant community with ethnically associated goods and services as well as with a wide range of professional services that are generally prevalent in the mainstream economy but are offered in the language of a specific migrant community in the enclave economy. To quote Kloostermann (2010: 32): These markets mostly arise from the articulation of ‘ethnic demand’ as a consequence of the migration of sufficiently large number of specific groups of immigrants. The formation of spatially concentrated settlement of (mainly first generation) immigrants in urban areas strongly contributes to the articulation of this demand. Immigrant entrepreneurs are usually much better positioned to benefit from these opportunities as they tend have the required knowledge of products, suppliers and consumers. They have, moreover, the necessary credibility to cater for these niche markets of co-ethnics. Migration background provides a business advantage for businesses in this market segment (Logan et al. 1994), and ethnic resources (especially vertical and horizontal social ties in the migrant

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community) are essential for the development of an enclave economy. Enclave economy as a rule requires spatial concentration of a sizeable number of persons and entrepreneurs from the same migrant group within a certain neighbourhood or geographic area and a minimum level of institutional completeness (Zhou & Cho 2010). Ethnic resources (social features of a group including values, knowledge, solidarity, information, institutions) is a collective rather than individual form of capital and thus benefit the whole group (Light & Bonacich 1988). Regardless of individual class resources, the whole migrant community can generally benefit from an established migrant economy and institutions (e.g. availability of specific food or education services that are not covered by mainstream economy). According to Zhou (2004: 1044): ‘Economic activities are governed by bounded solidarity and enforceable trust — mechanisms of support and control necessary for economic life in the community and for reinforcement of norms and values and sanctioning of socially disapproved behaviour’. Business-related relationships in the enclave economy often go beyond price-regulated relationships and involve commonly accepted norms of reciprocity and informal practices that provide co-ethnic owners, employees, customers, and business partners with certain benefits at certain costs (Zhou 1992; Zhou & Cho 2010). Enclave economy, apart from being a labour market entry opportunity for the disadvantaged who are forced into self-employment or low-wage employment, also offers economic opportunities that are not available in the mainstream market. Further, enclave economy has noneconomic effects, such as fostering community building by creating social structures and social spaces for cross-class interactions as well as a potential to ‘rebuild ethnic institutions and social relations disrupted by international migration’ (Zhou & Cho 2010: 87) by providing ‘ample space and opportunities for coethnic interaction at the institutional and individual levels’ (Zhou & Cho 2010: 91).

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5 Russian-speaking migrant market Studying ethnic communities, Breton (1964) applies the concept of institutional completeness to measure the degree of social organisation in an ethnic community seeing it as a continuum of informal networks of relatives, kin, and friends on the one side and formal migrant organisations (e.g. socio-cultural and political associations, practical help and counselling organisations, migrant media) on the other side of the continuum. High degree of institutional completeness is characterised by high number and high variety of formal organisations in a migrant community, usually associated with high coethnic closure (Zhou & Cho 2010) or, in extreme cases, with exclusion of out-group members and isolation (Breton 1964). According to Zhou and Cho (2010: 87), migrant entrepreneurship development is linked to institutional completeness and vice versa: Ethnic entrepreneurship affects a high degree of institutional completeness by promoting the development of the enclave economy and ethnic social structures. Institutional completeness gives rise to a unique ethnic social context for interpersonal interaction and networking within the ethnic group.

There has been an ongoing debate among scholars studying migrant entrepreneurship about whether businesses and employment in enclave economy are positive or negative developments for migrants’ social mobility. Some studies argue that enclave economy is a ‘mobility trap’ (Bates 1987; Borjas 1986, 1990) associated with self-exploitation by business owners, exploitation of co-ethnic employees, limited economic growth potential, and high vulnerability to saturation effects (Jones et al. 2000). As stated by Kloosterman (2010: 32): Ethnic markets are, in most cases, rather limited. These markets tend to be captive markets, but captivity here is

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a double-edged sword. It attaches customers to the firms of their co-ethnics and helps in the first difficult phase. However, at a later stage, these same entrepreneurs may run against the constraints of these specific markets (Ram et al. 2000). Expanding the business, then, comes down to broadening the consumer base and stepping out of the ethnic market. Portes and his colleagues (e.g. Portes & Bach 1985; Portes & Shafer 2007; Portes & Zhou 1996), however, emphasise the opportunities offered by enclave economy, arguing that it can be a mobility trigger showing that self-employed migrants in the studied groups had higher income compared to employed co-ethnics. Although in financial terms, migrant enclave business is usually beneficial for the business owners but less satisfactory for the employees (Sanders & Nee 1987), some studies report that lower wages in this sector are sometimes perceived as compensated by non-monetary advantages, such as, for example, more flexible work arrangements compared with a mainstream economy that enables a better workfamily-life routine or on-the-job training and introduction to relevant social networks as preparation for one’s own future self-employment (Zhou 1992, 2004). Several studies also emphasise the important function of the enclave economy as a ‘training system’ for future self-employment whereby informal training systems arise from close contacts between business owners and their staff (Bailey & Waldinger 1991; Ram et al. 2001). Due to some deviations from the traditional definition of enclave economy applicable to FSU migrants, the use of the term ‘enclave economy’ to refer to Russian-speaking businesses that are mainly serving the FSU migrant community is avoided in this study and the term ‘migrant market’ is used instead. First, the element of spatial concentration is not present for the Russian-speaking migrant market. Second, Russian-speaking businesses are not easily identifiable to outsiders due to their exterior design and business names

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(Kapphan 1997; Sommer 2011). Third, businesses in the gastronomic sector, which is often associated with enclave economy, are very rare. Despite these deviations, there is a well-established selfsustained Russian-speaking business infrastructure in Germany that shares other important characteristics of the enclave economy, such as co-ethnic clientele and co-ethnic business relationships, use of ethnic resources, as well as cultural and linguistic aspects as the economic advantage.

5.2 Russian-speaking migrant market in Germany9 The main function of the Russian-speaking ethnic market is to provide FSU migrants in Germany with East European goods (e.g. food, books, cosmetics), services with specific cultural aspects (weddings, funerals, cultural events, language courses, supplementary education programs, and after-school tutoring for children) and a wide range of services related to their general life in Germany that are available in Russian language. This well-established Russianspeaking infrastructure enables a life in Germany without a necessity to have advanced German language competence. Apart from that, administrative services related to the country of origin (e.g. consulate services, assistance with Russian pension or inheritance claims, issues related to visa and citizenship, registration of children born in Germany, etc.) are also embedded in the Russian-speaking migrant economy.

9

This section is mostly based on the author’s observations. The author has been studying the subject of FSU self-employment for almost a decade including several fieldwork phases at different time points between 2007 and 2013.

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Until the late 1990s, Russian-speaking businesses outside Berlin were relatively rare, and they were mostly small food shops, bookshops, travel agencies, and video rentals (Bernstein 2010; Kapphan 1997). Since then, there has been a dynamic development and diversification of Russian-speaking infrastructure in Germany (Sommer 2008, 2011). The small food shops that were common in the 1990s and early 2000s have been replaced by supermarkets, especially franchise chain supermarkets10. Due to high customs fees for the import of non-EU food products, most products offered in these supermarkets are produced directly in Germany11 or imported from East European EU-countries and supplied by distributors and wholesalers based in Germany12. Further, e-commerce and improved communication technologies have largely replaced the need for other smaller shops such as bookshops, video rentals, and call shops. Thus, the current Russian-speaking migrant market mostly comprises the service sector. There is a wide variety of services, some of which are specific culturally associated services (e.g. wedding industry, education programs for children) and services that are also available in the mainstream market (usually services that require communication). As these services target the FSU migrant group they are offered in the Russian language outside the mainstream market (e.g. insurance and tax consultancy, legal advice, care of elderly and sick, medical services). The latter category

10

11 12

For example, Mix Markt, established in 1997, was operating 160 supermarkets in Germany and another 90 in other European countries in 2017. Source (retrieved on 08.08.2017): http://www.mixmarkt.eu/de/germany/ueberuns/geschichte/. For example, by Dovgan GmbH in Hamburg or Leis GmbH in Schwülper in Lower Saxony. Sixty per cent of products offered in Mix Markt supermarkets are supplied by the Monolith-Gruppe based in Bergheim (North Rhine-Westphalia), a wholesaler owned by Russian-speaking migrants which also supplies German supermarkets with East European specialities. Source (retrieved on 08.08.2017): http://www.mixmarkt.eu/de/germany/ueber-uns/geschichte/.

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is larger than the ethnically associated services, and its growth, especially in the highly skilled segment, is associated with the increase in self-employment among FSU migrants that creates demand forprofessional business-related services (e.g. bookkeeping assistance, tax consultancy, legal advice, advertising companies, and IT services). This demand is usually met by younger self-employed FSU migrants who mostly received their professional qualification in Germany. They can use their intercultural competences, knowledge of FSU consumer preferences, proficiency in two languages, familiarity with the German economic and institutional system, as well as their intermediary position between the Russian-speaking migrant economy and German institutions as a competitive advantage. Further, there is a growing Russian-speaking care sector. Although care of elderly is mainly seen as a family task among FSU ethnic Germans (Sommer & Vogel 2016), with the increased proportion of elderly individuals among FSU migrants there is a growing demand for professional support offered by mobile home care services. Another relatively new development is an increase of ‘temporary work’ agencies (Leiharbeit) among migrant businesses in general, including the FSU migrant group (Siebenhütter 2013). The FSU migrant community in Germany is characterised by a relatively high institutional completeness with a high number and variety of migrant organisations. Russian-language media, socio-cultural, and religious associations are relevant for social organisation of the FSU migrant community. Germany-based Russian-language print media and online platforms play an important role for the development of the Russian-speaking migrant market. There are several German-wide13 and regional14 Russian-language newspapers

13

14

For example, Русская Германия – ‘Russian Germany’; Еврейская Панорама – ‘Jewish Panorama’; Neue Zeiten – ‘New Times’; Карьера – ‘Career’. For example, Партнер – ‘Partner’, Рейнская Газета – ‘Rhine Newspaper’.

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and magazines that are published in Germany. They offer an advertising platform for Russian-speaking businesses and are also used as a channel to advertise jobs in the Russian-speaking migrant market. Russian-language print media also serves as a transnational bridge between the FSU countries and the migrant community, for example by providing information about law changes in the FSU countries, publicising information provided by consulate services, or advertising services and businesses in FSU countries that might be relevant for migrants. There is also a growing number of free Russian-speaking, mostly local, newspapers that are financed entirely through advertising. They are often distributed in areas with large numbers of FSU migrants, and they are usually available in Russian-speaking shops (e.g. supermarkets, bookshops, travel agencies)15. Russian-language print media has also served specifically as an information channel for an increasing number of self-employed FSU migrants in the early 2000s. Issues relevant to self-employment and advice in Russian language (e.g. information about formal company registration procedures, funding possibilities for start-ups, discussion of new laws, etc.) became popular topics in the Russian-language migrant print media. Several specialised magazines such as Предприниматель (‘Entrepreneur’) or Оптовик (‘Wholesaler’) dealing specifically with migrant business themes were published. They also offered information and contact details of wholesalers and suppliers. In the late 2000s, some of the Russianlanguage print media including both aforementioned magazines for the self-employed either closed down or moved online. Regional and local firm catalogues (a Russian-language version of the “yellow pages”) that existed until late 2000s in print form were also replaced 15

Mix Markt supermarket chain, for example, publishes its own free newspaper, Mix-Markt-Zeitung (‘Mix-Markt-Newspaper’) with 60,000 copies printed on a weekly basis. Apart from advertising their own products, the newspapers include ads from other Russian-speaking businesses. Source (retrieved on 08.08.2017): http://www.mixmarkt.eu/de/germany/ueber-uns/mix-marktzeitung/.

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by digital firm catalogues available on Russian-language web sites for FSU migrants in Germany16. Further, online Russian-speaking social networks are used as a virtual space for sharing information, business advertising, and direct communication with potential customers.

5.3 FSU migrant market in Düsseldorf and in Waldbröl The Russian-speaking migrant market in Düsseldorf went through a process of diversification since its early development stage in the 1990s. Various meeting places for FSU migrants such as integration and education centres, business start-up seminars in Russian, cultural events, religious institutions, and Russian-speaking bars and clubs provided networking opportunities that were also beneficial for business. Younger migrants who received their education in Germany contributed to the diversification of the Russian-speaking migrant community, offering professional services to FSU migrants and especially to other Russian-speaking self-employed. Further diversification was due to a relative increase of transnational economic activities with FSU countries that are embedded in the Russian-speaking migrant economy. Düsseldorf is relatively popular for ‘medical tourism’ among Russians and Ukrainians. Russian-speaking businesses based in Düsseldorf offer services to clients living in the FSU countries that include searching for doctors and clinics, arranging appointments, and transferring and accompanying clients

16

For example, Germany-wide digital catalogues of Russian-speaking companies like www.ruindex.info, http://germany24.ru/, http://www.vsagermania.de, or regional firm catalogues like the catalogue of the North Rhine-Westphalian monthly Russian-speaking magazine Partner http://www.partner-inform.de/firm/ (retrieved 08.08.2017).

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to doctors. Medical tourism companies can benefit from a relatively high number of Russian-speaking medical doctors representing different areas of medicine17. Another area of transnational economic activities with the former FSU countries is related to services for companies attending trade fairs. Messe Düsseldorf hosts many international trade fairs and industrial exhibitions. Services include trade fair registration, travel and accommodation arrangement, assistance at the trade fair, and interpretation. Transnational businesses in the narrow sense are, however, still relatively rare in the Russian-speaking migrant community. FSU migrants are distributed throughout all neighbourhoods in Düsseldorf with a relatively high concentration in the south of the city in Garath and Hassels (Landeshauptstadt Düsseldorf 2012). With regard to self-employment, contrary to the classical assumption of ethnic enclave, the Russian-speaking migrant market is not spatially concentrated in a particular neighbourhood but distributed across the whole city (Sommer 2008). Several interviewed businesses assigned to the migrant market were located in central Düsseldorf in order to be easily reachable by FSU migrants from different parts of Düsseldorf and outside the city. Some of the businesses were located in neighbourhoods with a relatively large number of FSU migrants or near locations of institutions that are important to FSU migrants (e.g. near Jewish schools or near former so-called ‘emergency homes’ — temporary accommodation houses for FSU migrants in the first months after their arrival to Germany). Sometimes there are several Russian-speaking not-competing businesses in immediate proximity offering a wider range of products and services in the same building. Such an arrangement is not only convenient for customers but also for the business owners that 17

The author identified about 60 medical doctors from the FSU countries in Düsseldorf who were advertising their services in Russian-speaking print media and Internet portals during her research in 2008 (Sommer 2008).

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can piggyback customers on each other and share office and shop premises. Russian-speaking businesses are rarely visually identifiable as such in the street landscape for outsiders due to their names and exterior design. Distributing flyers, business cards, and other advertising materials in shops or offices of other Russian-speaking companies is a common practice. This ‘reciprocal advertising’ practice is shared by businesses that are not in direct competition and performed usually when the owners know each other in order to minimise risks of damaging one’s own reputation by making referrals to unknown businesses. Although internal ethnicity (Light et al. 1993) in general is applicable for the diverse subgroups of FSU migrants with regard to their personal networks (e.g. Dietz 2000), there is no obvious separation of businesses in the Russian-speaking economy for each of the subgroups. Respondents in their interviews sometimes refer to the perceived difference between the two large FSU migrant groups whereby they mostly focus on the rural/urban and educational divide rather than on religious or ethnic background. It is also common for the employees to be from the same FSU migrant subgroup as the owner. However, there seems to be no particular orientation towards clients solely from the same subgroup, and the majority of businesses generally target a Russian-speaking clientele. Further, although FSU migrants are coming from 15 different countries, there are no specific economic subgroups depending on the country of origin in the sense of the subethnicity concept (Der-Martirosian et al. 1993). In line with the findings by Rodgers et al. (2019) where in their UK study Russian-speaking business networks of FSU migrants that went beyond the particular country of origin and ethnicity, the Russian-speaking migrant market in Düsseldorf is a social space that enables interaction across FSU migrant subgroups and class lines and fosters internal bridging (Geys and Murdoch 2008) between different subgroups of the same migrant community. Although when asked about their private networks, most self-employed

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in the migrant market demonstrated a preference for their own subgroup; in business situations they usually sought entrepreneurial opportunities beyond their own subgroup and often drew back on a strategy conceptualised by Pütz (2004, 2008) as strategic transculturalism aiming at gaining economic opportunities by reflexively addressing different cultural subgroups. In general, there is a well-established Russian-speaking migrant economy in Düsseldorf with a relatively high level of institutional completeness and its own self-sustaining infrastructure with a diverse offer of goods and services. Its future maintenance is, however, questionable. The current market is largely saturated and its lifecycle — whether it remains sustained in the long term or ends as a transitional temporary market serving the needs of first-generation migrants — depends on newcomers. The number of FSU migrants arriving in Germany (excluding EU-migrants from the Baltic states) in the recent decade is relatively low and, therefore, a shrinking of Russian-speaking migrant market is expected in the future. Further, some businesses currently operating in the migrant market will move towards the mixed or mainstream market. The migrant market can get eroded also due to loss of relevance and attractiveness to second-generation migrants (Rusinovic 2006) as well as due to shifts in the taste and attitudes towards the mainstream linked to the longer duration of stay in the host country. There has already been a visible decline in some specific sectors like small food shops, bookshops, and travel agencies. As mentioned by one respondent: ‘A well-developed Russian-speaking infrastructure in Düsseldorf is very helpful especially for older people, but young people do not use it’ (Int. 39, D, therapy centre, female, 39). On the other hand, with the recent arrival of the EU labour migrants from the Baltic states and a large proportion of Russian-speakers among them, the Russian-speaking migrant market in Düsseldorf has recently expanded

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its offer spectrum to cover the needs of this specific group (e.g. consultancy regarding health insurance registration or recruitment companies operating between Germany and Baltic states). Out of 29 businesses assigned to the migrant market in this study, 27 were based in the greater area of Düsseldorf, with 20 business based in Düsseldorf itself. Only two migrant market businesses (a food shop and a flower shop) were interviewed in Waldbröl. In Waldbröl there is no obviously identifiable Russian-speaking migrant market that explicitly targets FSU migrants. A small cluster of businesses exists on the premises of the former integration centre (e.g. Russian food store, travel agency) that specifically aims at FSU clientele, but apart from that, other businesses usually target the general population without any particular function for the FSU migrants following the mixed market strategy (e.g. bakeries, car repair services, transportation of goods, craft and construction businesses, retail). Despite the high proportion of FSU ethnic Germans in Waldbröl, the actual number of FSU migrants is relatively low compared to Düsseldorf (3,000 compared to more than 20,000) which results in a relatively limited number of potential clients for migrant market businesses. Some small businesses aiming at the general population, however, unexpectedly become migrant market businesses due to their location in neighbourhoods with a very high proportion of FSU families. The following quote by a flower shop owner based in the Eichen neighbourhood with a particularly high proportion of FSU ethnic Germans is an example of such an ‘unintended’ direction towards co-ethnic clientele due to the shop location and scepticism of the host population, which however, also provides some economic advantages as there are no competitors in the area: I didn’t want to open a shop in the centre. There are enough shops there, in my opinion, and here I am the only one. It is nice for all the older people living here as they don’t need to ask someone going to the centre to

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bring them flowers when they need them. That’s why I decided that I will open my shop here. And people often asked me: ‘Are you sure that this is a right decision? Isn’t it too remote from the centre?’ But I am satisfied. On the other hand, I have only a few German customers. […] Most clients are Russian Germans. […] They (German clients) do not feel comfortable coming to this area. They still have this thinking like: ‘They (Russian Germans) have isolated themselves there (in Eichen)’. And maybe also: ‘They (Russian Germans) don’t want to have any outsiders there’. I have a few German clients from here, but most of my clients are Russian Germans. (Int. 54, W, flower shop owner, female, 27)

5.4 Overview of interviewed migrant market businesses In total 29 economic activities of self-employed FSU migrants interviewed for this study were assigned to the ‘Russian-speaking migrant market’ business strategy. The main criterion for classification of an economic activity as a migrant market business in this study is the dominance of co-ethnic clientele (more than 50% of the overall clientele). Another criterion is the orientation towards the Russianspeaking migrant community as the prime target customer group. Twenty-five businesses assigned to the migrant market category were operating in the migrant market at the time of the interview and four businesses were operating in the migrant market in the past. Among the reasons for giving up a migrant market business were financial difficulties, high competition, lack of experience, disagreements with business partners, and damaged reputation in one particular case of financial consultancy because of failed risk investment.

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Table 3 provides an overview of the interviewed businesses assigned to the migrant market strategy. The proportion of male selfemployed amongst interviewed persons in this sector was much higher than of females (20 males and nine females). Out of nine females assigned to this strategy, one respondent (IT services) moved to the mixed market after several years of self-employment in the migrant market, one respondent (food shop owner) gave up self-employment entirely, and one respondent (insurance agent) was considering giving up self-employment. Eleven interviewees whose businesses were assigned to the migrant market were FSU ethnic Germans, 15 were Jewish FSU migrants, and three were other FSU migrants. Nine persons were involved in multiple businesses at the same time. Seven interviewed persons assigned to this strategy had previous experience as employees in the Russianspeaking migrant economy before becoming self-employed themselves. Most of the interviewed migrant market businesses (17 out of 29) were still in the start-up phase (less than five years on the market) at the time of the interview, and the oldest business has been operating for 13 years. Among 29 migrant market businesses, eight businesses were high-skilled businesses (mostly IT services and business-related consultancy). The age of owners ranged from 25 to 64 years at the time of the interview with most interviewees being aged 35-50 years. Jewish respondents assigned to this business category were younger than ethnic Germans (see Table 4).

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Table 3: Overview of interviewed businesses assigned to the migrant market IntBusiness Status Nr.

Required Migrant skill group* level

Given up migrant market busi1 IT Service High EG ness, moved to mainstream market Travel Low/ 5 Start-up EG agency middle

GenAge** der

ForComal ownstaff ership ***

f

38 No

Yes

f

52 No

No

6

Vehicle appraiser

Established

Low/ EG middle

m

54 No

Yes

10

Child education

Start-up

High

JM

f

40 No

Yes

Start-up

High

EG

f

35 No

No

17 Bookshop Start-up

Low/ JM middle

f

43

Restau18 rant

Low/ JM middle

12 Lawyer

20

Food shop

Start-up

Given up Low/ after 5 EG middle years

Insurance agent and 24 investStart-up ment consultant

Low/ EG middle

m

f

m

Yes Friend

No

Yes Family 35 No member Yes Family 60 No member 39 No

Yes

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5 Russian-speaking migrant market

IntBusiness Status Nr.

Required Migrant skill group* level

GenAge** der

ForComal ownstaff ership ***

26

Insurance Start-up agent

Low/ OM middle

m

32 No

28

Care service

Low/ JM middle

m

33

Yes Friend

Yes

JM

m

46

Yes Friend

Yes

Trading of Internet contracts and 32 Start-up mobile phones, PC repair services

Low/ EG middle

m

35 No

Marketing and ad33 Start-up vertising agency

High

JM

m

30

Low/ JM middle

m

29 No

No

Start-up

Low/ JM middle

f

44 No

No

Start-up

Low/ JM middle

m

27

Low/ JM middle

m

Yes Family 32 Yes member

Start-up

Given up 29 IT service after 3 High years

34

Insurance Start-up agent

Travel agency Limou37 sine service 36

Russian 43 bar

Start-up

Yes Friend

Yes Friend

44

Care service

Given up Low/ after 1 JM middle year

m

28

46

Tax consultant

Established

m

41 No

High

JM

Yes Friend

No

No

Yes

No

Yes No

5.4 Overview of interviewed migrant market businesses Required Migrant skill group* level

GenAge** der

ForComal ownstaff ership ***

Start-up

High

JM

m

25

Yes Friend

Established

Low/ JM middle

m

28 No

Established

Low/ EG middle

m

Start-up

Low/ EG middle

f

IntBusiness Status Nr. Advertising 47 agency & graphic design Wedding 50 entertainment Food 52 shop

54

Flower shop

111

Yes

Yes

Yes Family 34 Yes member Yes Family 27 No member

Insurance agent and EstabLow/ 61 investOM f 36 No No lished middle ment consultant Distributor of Low/ 62a water Start-up EG m 57 No No middle filtering systems Business and tax Estab62b High JM m 43 No Yes consultlished ant Insurance EstabLow/ 62c EG m 64 No No agent lished middle Rental of holiday EstabLow/ Yes 62d OM m 60 No apartlished middle Friend ments Note: *EG – FSU ethnic Germans, JM – FSU Jewish migrants, OM – other FSU migrants; **Age of the respondent at the interview; ***Formal staff including freelancers.

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Table 4: Summarised overview of interviewed businesses assigned to migrant market

Ethnic Germans

Jewish migrants

Other FSU migrants

Low/middle-skilled businesses

9

9

3

21

High-skilled businesses

2

6

0

8

Start-up

6

10

1

17

Established (>5 years)

3

3

2

8

Given up

2

2

0

4

Female

5

3

1

9

Male

6

12

2

20

50 years old

6

0

1

7

11

15

3

29

Total

Required skill level

Business status

Respondent’s gender

Respondent’s age

Total

5.5 Types of migrant market businesses The businesses assigned to the migrant market strategy can be divided in two general categories: ‘ethnocentric enterprises’, providing co-ethnics with ethnically associated products and services, and ‘product-integrated’ businesses, providing co-ethnics with products and services that are not associated with their country of origin

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113

(Curci & Mackoy 2010). Based on the analysis of the empirical data collected for this study, both categories can be further divided in two subcategories that are described in more detail below. The presentation of the four types of migrant market businesses (Figure 4) which emerged from the empirical data focuses on offers, market access barriers (skills and financial requirements), development potentials, client recruitment channels, and dominating business-related relationships. Figure 4: Types of businesses in the migrant market

Source: Own figure.

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5 Russian-speaking migrant market

Ethnocentric businesses I. Businesses offering ethnically associated products (e.g. food stores, bookshops, restaurants) Six businesses were assigned to this subcategory: three food shops (two of which closed down whereby one respondent moved to a different business in the migrant market and the other former food shop owner gave up self-employment completely); one Russian restaurant and one Russian bar; and one bookshop. These businesses are characterised by a relatively low barrier in terms of required qualifications, but they often depend upon a relatively high financial start-up capital that is usually provided with the support of family members. The pioneers establishing their businesses in this niche enjoy a market with low or no competition because they offer products that are not provided by the host mainstream market. At some point the niche is filled with ‘veterans’ and the niche access for newcomers is becoming increasingly more difficult. If a migrant group of the same origin reaches a critical size at some point, meaning that the market is large enough, smaller companies can be forced out of the market by larger companies. Many small Russian food stores were unable to compete with larger chain supermarkets dominating in the Russian-speaking migrant market since the mid-2000s. Physical location is usually important for these migrant market businesses. They are often found in areas with a large number of Russian-speaking migrants, near institutions that are frequently visited by Russian-speaking migrants, or in central parts of the city that are easily reachable by public transportation for migrants living in different areas of the city and in nearby towns. Products are usually purchased from wholesalers based in Germany or East European EUmembers mainly due to high customs charges and transportation costs for import from non-EU countries. Transnational contacts in the country of origin are not necessary and are used on occasion as

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a complementary strategy. For respondents in the gastronomy sector, they were not relevant for their business at all. Several shop owners, however, expressed their wish for a more intensive involvement in transnational economic activities that could be beneficial for their business, but there were some constraints imposed by the politico-economical context including visa regulations and legal regulations for import of goods from non-EU countries. In line with the mixed embeddedness approach (Kloosterman & Rath 2001), this illustrates that the scope of possible action for transnational economic activities is influenced by the structural framework and politico-economic context both in the host and the sending country. The wish for more transnational involvement, was expressed, for example, by a bookshop owner. Her business uses a ‘combined model’ with most products being purchased from online trade portals within the EU (mainly based in Germany and Czech Republic) and sporadic informal ‘imports’ from Russia for orders on demand that are not available online. Her former colleagues at a publishing house in Russia where she used to work before migrating to Germany are purchasing the demanded books and sending them to Germany: In the future, we would like to work with publishing houses in Russia directly […] Ideally, we would like to have a staff member who would regularly travel there and purchase the books directly from the publishing companies and bring them to Germany after customs clearing. But we cannot afford this as of now […] Therefore, we are currently applying a kind of ‘mixed model’. (Int. 17, D, bookshop owner, female, 43) Business relationships with the wholesalers (mostly bigger companies owned by FSU migrants in Germany) are usually of a formal price-regulated nature. Business-related contacts to natives are limited to necessary institutional contacts. Although the vast majority of clients are FSU migrants, sporadically, German clients and clients

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from other migrant groups enter this specific niche (e.g. locals curious about Russian food or German schools and libraries purchasing books in Russian). The client circle goes far beyond the own social circle as a critical mass of clients is needed for the business to survive. Thus, wide channels of client acquisition and business advertising are used such as distribution of flyers in areas with a high proportion of Russian-speaking migrants, at Russian-speaking events, or in other Russian-speaking shops and offices. Businesses are also often advertised in local Russian-speaking migrant print media, online portals, and Russian-speaking social media. The shops are often seen as a kind of a meeting point for the Russian-speaking migrant community offering social space for interaction and internal bridging between FSU migrant subgroups. Informal cooperation with other local small FSU companies is common whereby the premises are often used to circulate information within the migrant community and offer space for cultural and business events promoting network opportunities. In general, cooperation with other small FSU migrant market businesses including those in the same subcategory is common. For example, respondents mentioned exchange of products between small food shops located in different areas of the city (and thus not directly competing) to have a wider range of offered products or negotiations about opening times among Russian-speaking bars and restaurants. The owners of small businesses in this niche often work in the shops themselves and are known to a large number of Russian-speaking migrants. The owner’s presence and personal communication with the clients are often seen by customers as a natural part of the service which was perceived by several interviewed persons as rather negative and stressful, as mentioned by a food shop owner in Waldbröl: I need to be here all the time. I realise when I go on holidays in summer, the turnover falls. In one week about 20% less. Because the customers are coming to

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the shop and they ask: ‘Is Andy (name changed) here?’ ‘No’. ‘OK’. And they leave. That’s why I belong 100% to the inventory of this shop. And this is something I don’t want long-term. This is silly. […] You know, sometimes I feel like a shelter for everyone. […] Or like a social welfare office. […] House of charity. […] When people come and start telling you their private problems and so on. And they tell me all this stuff because they see a trustworthy person in me. They think that I am a doctor or whatever. […] After some time I started telling them: ‘People, please don’t tell me all this stuff. I am here only for business and this is not OK. I have so many things to do. I can gladly consult you on issues related to my business if you want. I can tell you what tastes good and what is rubbish in my shop. But please no private stuff’. (Int. 52, W, food shop owner, male, 34) The owners are often recognised and approached by people in the migrant community who visited their shops and this unintended prominence is perceived by some respondents as a negative aspect associated with social control and stress related to expected involuntary personal communication with co-ethnic customers outside their work context. Respondents assigned to this type of migrant market businesses used a mix of strong and (mostly horizontal) weak ties within the Russian-speaking migrant community. Strong ties were predominantly used for financial and practical support. Weak ties were used for information exchange and client acquisition. The business-related network was a mix of formal price-regulated relationships (e.g. wholesalers and relevant German institutions) and informal, either price-regulated or reciprocity-based, relationships (e.g. with other FSU small businesses and migrant institutions or with sporadic informal staff).

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II. Businesses offering ethnically associated services (e.g. wedding entertainment, cultural and linguistic education for children) These businesses provide FSU migrants with services that are associated with the Russian-speaking Soviet and Post-Soviet culture. Among interviewed businesses assigned to this migrant market subcategory were a wedding entertainment business, a children supplementary education and after-school tutoring business, as well as a music performance business that was an overall business assigned to the mixed market strategy because the respondent was using several separate market strategies, one of which specifically targeted the Jewish FSU migrant community.18 This type of migrant market businesses is typically characterised by a relatively low financial entry barrier, but usually it requires a specific qualification (e.g. vocal or artistic skills, pedagogical education) in addition to cultural knowledge, which is the main competitive advantage of this type of businesses. Despite the competition within the sector, this niche that mostly comprises creative professions and is open to diversity, is relatively accessible both to veterans and newcomers. While the competitive advantage of veterans is their established reputation in the Russian-speaking community, the advantage of the newcomers is that their cultural knowledge is usually ‘more updated’ and they can introduce innovative elements. In general, there is an ongoing demand in this sector, especially for supplementary child education and Russian language courses for the second-generation FSU migrants. Business owners in this sector often advertise their businesses in the Russian-speaking print and online media. They are also usually present at various cultural Russian-speaking events that they use for networking. Informal contacts in the Russian-speaking community are important for this sector, and cooperation with and/or mutual 18

This business example is described in detail in Section 6.5.

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referrals to other non-competing Russian-speaking self-employed in a related area are a common practice (e.g. referrals to Russianspeaking wedding photographers, catering services, hairdressers). There is a relatively high degree of informal business-related relationships within the Russian-speaking migrant community characterised by mixture of horizontal and vertical weak ties. Business-related relationships to German companies or institutions are hardly relevant for this type of businesses except for the child education sector. Due to the specific focus of this sector a wide range of clients is common. Some businesses are local (e.g. supplementary child education) but countrywide clientele is also common, especially in artistic professions. Although these businesses mainly target fellow FSU migrants as clients, sometimes they also have clients outside the FSU migrant community (e.g. in case of mixed marriages or after-school facilities offering Russian-language courses to beginners), but they are relatively rare. Transnational social capital in the country of origin is frequently used to get an ‘update’ on cultural trends in the country of origin that are then transferred to the FSU migrant community in Germany or to enable exchange activities (e.g. school trips) and organise joint events (e.g. concerts). This is a kind of transnational middleman market bridging country of origin and the migrant community in the host country.

Product-integrated businesses As can be seen in Table 3 (Overview of interviewed businesses assigned to the migrant market), the vast majority (22 out of 29) of the interviewed migrant market businesses offer non-ethnic Germanyrelated products and services to the FSU migrant community that are also offered by the mainstream market (e.g. insurances, care of elderly and sick, legal aid, Internet contracts, financial advice, IT services). Familiarity with the mentality of co-ethnics and language

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5 Russian-speaking migrant market

skills offer exclusive competitive advantage over native businesses providing similar businesses. Rusinovic (2006: 67), in her study of migrant entrepreneurship in the Netherlands, refers to such businesses as a ‘niche market’: These entrepreneurs, whose specialization and knowhow has nothing especially ethnic, have the cultural competence to enter this niche market (Pütz 2000); they have a competitive edge over natives, in which ‘trust’ is crucial, in addressing themselves to people with the same immigrant background with a non-ethnic product. A product-integrated (Curci & Mackoy 2010) niche market can be partly seen as a ‘middleman market’ directed towards migrants bringing knowledge and products of the host society to migrants and helping migrants in the early phases of their integration in the receiving country. Product-integrated businesses as a rule require some degree of familiarity with sourcing products and services in the mainstream economy and with the business practices of the host society (Curci & Mackoy 2010). Often involvement in formal networks of the mainstream market and host institutions is required for these businesses (e.g. insurance companies, legal institutions, internet providers). At the same time, migrant niche market entrepreneurs draw back on ethnic resources and informal networks within the migrant community for client acquisition and staff recruitment. Further, product-integrated businesses differ with regard to the required skill level, which in turn has an impact on development potentials and the use of social capital. III. Low/middle-skilled Germany-related services for Russian-speaking migrants (e.g. insurance agencies, care for elderly and sick, travel agencies) These businesses target at FSU migrants by offering services in the Russian language that are generally also provided by the German

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mainstream economy and require low or middle-level professional skills to enter the sector. The financial entry barrier is usually relatively low or moderate but can vary depending on the business, as this market strategy comprises a wide range of various business activities. All these different activities commonly involve communicating, understanding, and negotiating, and the main competitive advantages are the language and perceived understanding of the mentality of the FSU migrants. For example, as mentioned by an owner of a care service company: I understand their (of elderly Russian-speaking migrants) mentality. I know what and why they want. And I have had a longstanding experience of communicating with elderly people and know how to approach them. I simply know the needs of the elderly. Especially of our Russian elderly people. […] If I don’t talk to them, people will think that I don’t need them. […] That’s why I have regular talks with colleagues and patients. Some patients refuse to sign any papers if they have not personally talked to me. And once a month I visit them to talk. Just talking. About nothing. Stuff like weather, sun, moon, and stars. (Int. 28, D, care service company owner, male, 33) With 15 businesses that were assigned to this category, this was the most common strategy among interviewed businesses working in the Russian-speaking migrant economy. This sector is especially demanded by elderly FSU migrants with language difficulties and/or lack of knowledge of the German system, as told by an Internet and mobile contract retailer: The main clientele is Russian-speaking. They still have contracts with Deutsche Telekom and pay them lots of money. These are mostly elderly people […] who regis-

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5 Russian-speaking migrant market tered a contract with them when they arrived in Germany and have never changed it since. And no one tells them that they can save about at least 120-150 Euro per year with other providers. (Int. 32, D, Internet and mobile service contract retailer and PC repair business, male, 35)

Businesses assigned to this category are exposed to relatively high competition both within the migrant market as well as from the mainstream market. The demand for these Russian-speaking services declines with the increasing stay duration as migrants become more familiar with the host society and younger migrants especially experience less language barriers and can receive the same type of services from mainstream businesses. The high competition for clients within the Russian-speaking migrant market makes the entrance for newcomers difficult. Aggressive practices of damaging reputation to ‘move’ competitors from the shared market were mentioned in several interviews. Interviewed persons assigned to this particular strategy were usually older than respondents assigned to the other three strategies within the Russian-speaking migrant market. Most of them came to Germany as adults with a profession they acquired in their country of origin but experienced difficulties finding a job in Germany that matched their education and skill level and instead chose self-employment focusing on a Russian-speaking clientele. Different advertising channels are used in this sector. As there is a high competition from the mainstream market offering similar services in the German language, German clients are rare and mostly come through referrals, for instance in case of mixed marriages or if they are colleagues or friends of existing clients. Business contacts with natives are limited to necessary, formal price-regulated

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business relationships (e.g. with insurance companies, Internet providers), while contacts in the Russian-speaking community are very important. First clients are often recruited from respondents’ own family and friend circles. The client circle is then extended by referrals. Word of mouth is the most important channel for client acquisition. Direct approach of potential clients is less frequent and is mainly applied towards companies rather than individuals. Russian-language migrant print and online media as well as flyer and business card distribution in Russian-speaking shops are also used as advertising channels, but due to a large number of other similar providers resulting in high competition, these channels are less effective than referrals by existing clients. Also, ‘approvals’ by persons in leading or central positions in specific groups were mentioned as an important aspect of client recruitment. Especially in the beginning of the entrepreneurial career, referrals and ‘approvals’ help to minimise risks of unknown reputation. One of the respondents (insurance agent) strategically aimed at getting ‘approval’ from persons in central positions in family and friend networks in order to gain other network members as his clients: It’s not like one big branch of a tree. These are threads, lots of tiny threads. And these threads are interconnected. […] Groups, clans, families. And in a clan there is an uncle Peter or an aunty Claudia who has a say and everyone would do what they say. This is everywhere. In every family there is a ‘leader’. And in principle my job is to get this leader on my side. If the leader is on your side, then everyone around is as well and they would not even say anything. Even if there is someone coming from outside, someone from the competitors, they would still go to the leader to ask ‘Should we?’. (Int. 24, D, insurance agent, male, 39)

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5 Russian-speaking migrant market

Another mentioned client acquisition strategy is a so-called ‘info day’ (Infotag) event, whereby several non-competing businesses organise an information event to which they would invite other FSU migrants to discuss certain topics or business ideas and use this event to advertise their own businesses and discuss possible cooperation with other interested FSU migrants. These networking events mostly happen at premises that are known to FSU migrant community, such as Russian-speaking shops, cultural clubs, or associations. This mechanism of collaboration is described by one of the respondents as follows: This is how we get to know each other. You are invited to an info event. We go there, listen to them, get to know people. Then we invite these people to our info event. There is an exchange. Someone refers you to someone. I referred a couple of clients to my self-employed friend. He, in turn, invites his clients to our info days. […] And we distribute our business cards. This is in general how we support each other. (Int. 62a, D, distributor of water filtering systems, male, 57) Cooperation between non-competing companies within this type of businesses is common (horizontal ties) as well as cooperation with high-skilled migrant market businesses (vertical ties) mentioned in the next section. For example, cooperation between a care service company and FSU medical doctors, or between a vehicle appraiser and a lawyer, were mentioned in the interviews. A relatively high degree of informal business-related relationships within the Russian-speaking migrant community with a mixture of horizontal and vertical weak ties is common for this type of businesses. Transnational business-related relationships, on the other hand, are hardly relevant (except travel agencies) as they mostly focus on provision of services relevant to daily life in Germany.

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IV. High-skilled Germany-related services for Russian-speaking migrants (e.g. lawyers, tax and business consultants, IT services) Establishment of the Russian-speaking migrant market and increasing self-employment amongst FSU migrants are associated with a growing demand for business-related professional services that are mainly provided by highly skilled (usually younger) FSU migrants who studied in Germany. Some of them see this sector as a niche with low competition and a relatively low or moderate required financial start-up capital. Russian language knowledge and intercultural skills as well as social capital in the FSU migrant community serve as a competitive advantage compared to native population. Competition within this sector of the Russian-speaking migrant market is also relatively low due to high demand as most FSU migrants who studied in Germany operate on the mainstream market as employees or self-employed and do not deliberately decide to enter the migrant market. Seven businesses were assigned to this strategy. Some of the interviewed persons assigned to this category felt that due to their migration background they would be less successful in the mainstream market compared to natives in the same industry. In the sense of bounded rationality and optimisation under constrains, they chose the migrant market. Some of them also used the Russianspeaking migrant economy as a kind of ‘apprenticeship’ to gather experience as self-employed and to develop better products or services before breaking out of the migrant market and moving to the mixed or mainstream market. Clients from their own social circle are less common for this type of businesses as compared to the low/middle-skilled Germany-related migrant market businesses as these businesses usually offer specialised business-to-business services rather than routine services

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for individuals. A common strategy of client acquisition is direct approaching of potential clients. As most services of this type target at companies, potential clients can be searched in Russian-language business catalogues or online portals and print media. A network of industry (professional ties) is another important source of clients. Most businesses have their own web site in German and Russian. Advertising in Russian-language online portals and print media is mainly used to ‘show presence’ rather than for client acquisition. Some of the businesses have an intermediary function bridging the migrant market with the mainstream institutions. Despite studying in Germany, business contacts with host population beyond the necessary formal institutional ties are, however, rare. Exceptions are companies that planned moving to the mainstream market and used the migrant market as a ‘trial’ and maintained social contacts outside the migrant community, especially within their professional network. Some respondents, however, reported a loss of social ties with their German fellow students after graduating from university (e.g. ‘German alumni do not stay in touch with each other. I have no idea where my German fellow students are. And this, of course, limits our business activities’, Int. 46, D, tax consultant, male, 41). As most businesses focus on Germany-related activities, transnational social capital is not perceived as relevant for business activities by most of the interviewed businesses assigned to this category (except IT businesses). Cooperation with other businesses in the FSU migrant sector is, on the other hand, an essential part of the business strategy. There is a mixture of horizontal and vertical business-related ties within the migrant community with a relatively high degree of informal relationships. Table 5 summarises the main characteristics for each type of migrant market businesses discussed above.

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Table 5. Attributes of interviewed migrant market business types Type of business

Entrance barrier

Dominating client acquisition channels

Dominating business relationships

Ethnocentric businesses Ethnically associated products

Ethnically associated services

Low/ middle skills level Middle/ high startup capital

Beyond personal social circle

Formal price-based ties with wholesalers

Flyer distribution

Informal horizontal ties with other FSU migrant small businesses

Local and regional Russian-language print media and Internet portals

Specialised skills

Beyond personal social circle

Low/ middle start-up capital

Local, regional, and Germany-wide Russian-language print media and Internet portals

Low/middle use of transnational ties Mix of horizontal and vertical ties to other FSU migrant businesses with high degree of informality Moderate/high use of transnational ties

Russian-speaking events Product-integrated businesses Low/middleskilled Germany-related services

Highskilled Germany-related services

Low/ middle skills level Low/ middle start-up capital High skills level Low/ middle start-up capital

First clients from own social circle

Formal price-based ties with German suppliers

Extension of client base by referrals

Mix of horizontal and vertical ties to other FSU migrant businesses with high degree of informality

‘Info day’ events

Direct approach of potential clients (mostly other FSU businesses) Own professional network

Transnational ties are hardly relevant Formal ties with German institutions Informal ties with other FSU migrant businesses Low use of transnational ties

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5.6 Motivation to start a business in the migrant market In general, migrants’ motivation to start their own business is analysed in terms of push (e.g. unemployment, discrimination in the labour market, language barrier, blocked promotion) and pull (e.g. market opportunities, independence, realisation of own ideas) factors (Masurel & Nijkamp 2004). While eight respondents assigned to the migrant market strategy explicitly named unemployment as the main reason for their self-employment, most other respondents mentioned a combination of push and pull factors. Among other mentioned push factors were dissatisfaction with the job and blocked mobility (e.g. unstable contracts, no promotion opportunities, problems with employer or colleagues, unsatisfactory salary). Pull factors mentioned included better earning opportunities, realisation of own business ideas, and willingness of other FSU migrants (mostly family members and friends - strong ties) to start a business together as partners. Several respondents started their business first as a side business (Nebengewerbe) and kept their jobs as employees in order to protect themselves and their families from risks associated with financial uncertainties in the start-up phase and/or to have a ‘trial’ before moving to full-time self-employment. Some respondents were temporarily unemployed before the official startup of their business in order to prepare themselves for self-employment. Business decisions are influenced by motivations. Motivation of business development in a migrant market is related to use of and contribution to resources of co-ethnic community (Gomez et al. 2015). Kontos (2003) further sees motivation as a processual rather static one-dimensional resource for coping with uncertainties of entrepreneurship that result from biographic experience. As demonstrated in Schmiz’s (2013) study, motivations can change over time

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turning self-employment started as a result of a migrant’s disadvantageous position in the labour market into a prestigious position in the migrant community offering social and economic advancement and, especially for female migrants, opportunities to balance work and family life. Motivation is also an important aspect when it comes to embeddedness in business networks (Gomez et al. 2015). When asked about motivation for starting a business specifically in the Russian-speaking migrant market, four main reasons that are described below were mentioned: identified market gap; difficult access to mainstream market; gathering business experience before moving to mainstream market; and desired social proximity to the FSU migrant community and intended social distance to host population. Identified market gap Some of the interviewed self-employed identified a market gap or a niche in which they could cover a specific demand with relatively low or no competition. As a self-employed vehicle appraiser explained in the interview, he came up with the idea of becoming self-employed after he had a car accident himself and realised that there was a lack of Russian-speaking certified vehicle appraising services for car accidents in Germany: I was at a traffic light and a German woman hit my car. Of course, a car appraiser came. […] He looked at the car, took photos, and told me the costs. And then for some reason I thought, why not start doing this myself. And I started looking in all available literature for information related to vehicle inspection. […] And I found out that for whole Germany in 1998 there was only one Russian-speaking expert in this area based in Berlin. […] In the first years this was what I counted on. I counted on language problems and took this as a starting point. I

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5 Russian-speaking migrant market started my work. My German language was also not great, but theirs was even worse. And the business developed slowly. But I could explain to them in Russian what they did not know. And they liked it. (Int. 6, D, vehicle appraiser, male, 54)

Although the Russian-speaking migrant economy has largely completed its establishment phase and pioneers and veterans have already filled most market gaps, some new market gaps still emerge contributing to diversification of the Russian-speaking migrant economy. While in the early phase of Russian-speaking migrant market formation most identified demand focused mainly on individuals or family needs of FSU migrants, in the later establishment phase there was a demand for professional services for Russian-speaking businesses, and younger FSU migrants especially who received their education in Germany could benefit from this market gap. To quote an interviewed IT-service company owner: We realised that there was not even one Russian IT firm in Düsseldorf. There were lots of private IT people who were visiting you helping with PC set-ups and repairs but there were no IT companies. And I thought, it would make sense to create an IT company because Russian businesses that already exist here probably need professional service and not someone private. (Int. 29, D, IT service, male, 46) Access to social networks and active customer acquisition in the migrant community are central aspects of business establishment as they reduce transaction costs related to search for demanded products/services, appropriate suppliers, and clients.

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Difficult access to mainstream market Another motivation for running a migrant market business is related to perceived difficult access to the mainstream economy. In the sense of bounded rationality, migrant market is seen as a satisfying alternative. The access is perceived difficult for various reasons. Some respondents mentioned language as a barrier in consulting professions to gain access to native clients, as stated by an interviewed owner of an advertising company: We really want to move to the German market. I will repeat myself — advertising is something personal and needs an individual approach. You need to talk to the manager or the owner of the company to discuss their advertising strategy and communication channels. It is obvious that it is easier to gain someone’s attention and to be on the same emotional level if you are a native speaker. (Int. 33, D, marketing and advertising agency, male, 30) Perceived distrust by native clients was also mentioned. It was not solely related to the language aspect but to migration background in general based on the assumption that migrants with a relatively short stay in Germany are not able to offer the same quality of certain services that require understating of host institutions and German mentality, as demonstrated in the following quote: To be honest, it is very difficult to have any business relationships with Germans for one simple reason: Their perception of people who speak German with an accent is not very good. Especially in this profession when it is about their finances, it is very difficult to explain to them how someone who has been living here for a short time is going to consult them on what to do with their money. (Int. 26, D, insurance agent, male, 32)

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Another issue related to difficult access to the mainstream economy is lacking access to professional networks of the host population and the associated risk of unknown reputation of new migrant firms. The following statement of an interviewed IT professional who started her business in the migrant market but after several years moved to the mainstream market, demonstrates this problem: It was easier for us (to start a business in the migrant market) because it was very difficult to approach German companies. We arrived in Germany with two sport bags without speaking German and with no social contacts. But no one is going to talk to a person from the street about ERP systems, which is a very sensitive area of a business. […] The competition (in the mainstream market) is very tough. And besides, because of our accent and because we were not integrated in relevant professional circles, it was difficult for us to communicate with these people (German companies). In their perception, they put us on a level below theirs. (Int. 1, IT company, female, 38) Respondents mentioning this motivation decided to focus on the FSU migrant market and cooperation with co-ethnic business partners as an alternative strategy in order to overcome uncertainty and perceived ambiguity in interaction with German businesses. Although embeddedness in the migrant community is important for companies that decide to start their business in the migrant market due to problematic access to the mainstream market, most respondents who mentioned this motivation were eager to extend their services to a broader market in the future and worked on extending their social business-related ties beyond the migrant community.

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Gathering business experience before moving to mainstream market Related to difficult access to and competition in the mainstream market is also the wish to gather practical experience and to improve services, products, or business strategy before moving to the mainstream market. This is another mentioned reason for starting a business in the Russian-speaking migrant market mostly common among high-skilled non-ethnic services. Respondents following this motivation used their co-ethnics as test customers and their experience in the migrant market as a kind of ‘apprenticeship’ in order to cope with risks of uncertainty and challenges of bounded rationality common for inexperienced entrepreneurs before moving to more profitable markets. Especially in the beginning when the companies were new and unknown, access to clients from the migrant community was easier than to native clients whereby the potentially lower quality of offered services due to lacking experience was compensated by lower prices. Some respondents felt that in order to survive in the highly competitive mainstream market they needed to offer better quality than offered by their native competitors. Self-employment in the migrant market was perceived as an opportunity to work on quality development of the offered products and to better analyse trends in the mainstream market before breaking out of the migrant market. An advertising and graphic design company owner explained: Our company exists now for two years. In the beginning, there were three of us and we had no concrete idea about how it all works. We developed products according to our own taste. […] And this was in principle our first mistake. We should have, namely, informed ourselves about current trends and which product is the best for us to focus on before starting our business. We did only what we were familiar with, which in principle

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5 Russian-speaking migrant market was OK […] but this was more about learning in practice. After about a year and a half I got a clear understanding of what I need to do and how to develop myself. […] Our first clients were certainly Russian-speaking because we did not have any other access channels to clients than people we know and their acquaintances. […] First, our priority was Russian-speaking clients. To be able to work with Germans you need to have a very good base in terms of your presentation. This is what I have been working on for the last two months. In the evenings and at nights I am searching for new texts and information, analysing how Germans sell all this stuff. […] Intuitively, unconsciously, maybe people even don’t realise it. I think that if you put three similar companies next to each other, most probably the German company will be chosen. But taking this into consideration, I know that if your product is ahead of the others in terms of quality, then they won’t care anymore if you are a Russian or not. (Int. 47, D, advertising and graphic design company, male, 25)

Similarly to respondents whose motivation to start their business in the migrant market was guided by problematic access to the mainstream market, social business-related ties in the migrant community play an important role in the early phases of the business startups, but as there are concrete plans to move to the mixed or mainstream market in the future, respondents invest in maintaining social ties outside the migrant community (especially in the network of industry, e.g. ties to former fellow students or colleagues) and in getting access to professional social networks of natives (e.g. attending professional events, trade fairs and seminars).

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Desired social proximity to FSU migrant community and intended social distance to host population Some respondents decided to start a business in the Russianspeaking migrant market not primarily for economic reasons but mainly because they wanted to be socially close to the Russianspeaking community and/or have a social distance to the host population. Some of them wished to be close to people with whom they share the same background and mentality on a daily basis, and some of them previously had a negative experience with German colleagues, businesses, or institutions or felt uncomfortable with natives because of the language barrier and unfamiliarity with German culture. One of the respondents who was previously involved in Russian-speaking elderly care services and at the time of the interview was running a new transnational business linked to the migrant market, when asked for his motivation for becoming self-employed, replied the following: I think that many people simply cannot find themselves in this German world. They think that rather than having contacts with Germans it is better to open your own business. I also thought that way. That’s why (started own business). Germans have a different mentality, you need to adapt to it. (Int. 44, D, care service, male, 28) Business activities in the Russian-speaking migrant market are perceived by this group of respondents as a chance to build social networks and to get friends in the FSU migrant community, as mentioned, for example, by an interviewed bar owner: ‘If I did not have the bar, it would be difficult because I met many Russians through the bar’ (Int. 43, D, bar owner, male, 32), or by a tax consultant: ‘I got real friends when I became self-employed, mainly when my Russian-speaking clientele started reaching out to me’ (Int. 46, D, tax consultant, male, 41).

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Self-employment motivated by desired disintegration from the host society is relatively rare compared to other mentioned motivations. Such businesses are entirely embedded in the migrant market milieu whereby transnational ties to country of origin are more common than among other groups. Social ties outside the FSU migrant community or transnational networks are reduced to necessary contacts with German institutions.

5.7 Social capital as a resource for migrant market Migration is usually associated with loss of social capital. Respondents with a previous pre-migration self-employment experience in the country of origin, and respondents with a relatively short stay duration in Germany at the time of starting-up their business, perceived loss of social capital and lack of trustful persons as a challenge in the start-up phase. Loss of social capital was perceived as an economic disadvantage compared to natives as the following two quotes demonstrate: There is one main problem. When we started something there (country of origin), we grew up there and we had, let’s say schoolmates, friends. There was a principle ‘you don’t need money if you have friends’. […] Especially in the Soviet times, problems were not solved with money but only through social contacts. If you need something, you go to a friend who, let’s say, works in a factory, or a friend who is a director, or something else. And this was a way of solving problems. Here it is the same. They (natives) grew up here and they have their social circle and they help each other. And we have nothing here. We don’t have this base. This is the main problem. In order to move forwards, to work, you need this kind of social contacts here. Contacts that will help

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you. You need materials? Someone will tell you where to get them cheaper. You need clients? Then your friends will help you. Especially those who are related to your business and social environment. […] And we don’t have this here. We need to integrate first. (Int. 62d, D, rental of holiday apartments, male, 60) When I started my business here, I thought it was much easier to run a business in Ukraine because I had all the networks there. There were all the necessary people that I knew personally and I already knew their psychology. (Int. 26, D, insurance agent, male, 32) In order to compensate for the lack of trustworthy business contacts, some respondents started their business together with a family member or friend. While most businesses (16 out of 29) assigned to the migrant market strategy did not have any co-owners, five businesses were co-owned by a family member and another eight by a friend. Waldinger et al. (1990) differentiate between ‘sole proprietorship’, ‘family partnership’, ‘partnership with kin or friends’, and ‘partnership with others’, emphasising that these different forms of ownership require different mixes of social, financial, and human capital and are tied to different markets. In the migrant market, ‘sole proprietorship’, ‘family partnership’, and ‘partnership with kin or friends’ dominate as their requirements are easier to fulfil as compared to other forms of co-ownership that are more common for the mainstream market (Engelen 2010). All cases of business co-ownership in the migrant market businesses in this study were with persons from personal social circles (family members or friends). A close relationship between business partners is seen as a means to reduce risk of opportunism (Ahuja 2000). Further, the knowledge of the host system (laws, market, funding opportunities) was perceived as helpful to compensate for lacking

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vertical social capital in the host and migrant society, as revealed by the following respondent: You can always find gaps if you want. […] You need to look into laws, understand how they work. There is information everywhere. Then you don’t need to look for a Paul or an Alex who will call a Mary. But this is a different approach to a problem. (Int. 62b, D, business and tax consultant, male, 43) Social embeddedness in the Russian-speaking migrant community provides newcomers with contacts to people with similar migration backgrounds. Although the long-term benefits of co-ethnic social capital for migrant businesses are debatable, the short-term benefits have been widely acknowledged in studies on migrant entrepreneurship. The migrant community is not only an important source of social capital but also a collective source of information in migrants’ language. Generally, migrants are often disadvantaged in comparison to natives in terms of their access to higher positions in the labour market and to vertical social capital. As emphasised by several prominent social capital scholars (Coleman 1998; Lin 1999; Mouw 2003), it is not social contacts per se or their quantity that matter for social capital but the resources that they contain and that can be accessed and activated for certain purposes. Although it was relatively easy for most respondents to get new social contacts in the Russian-speaking community after their migration to Germany, respondents frequently mentioned that there were difficulties finding people who could be useful for their self-employment either as advisors or business partners, and especially vertical ties to co-ethnics in higher social positions were relatively difficult to access. A lack of people who could provide reliable, updated information was mentioned among the key difficulties in the business formation phase. The following quotes from respondents reflect this problematic access to vertical upward social capital in the migrant community that could be beneficial for their business:

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There were, figuratively speaking, no problems to meet new people to drink vodka. But to find people with whom you could discuss or get advice on concrete questions or problems — even now I only have a few of them. […] These are as a rule people who have achieved something and who have a certain status. And back then, I did not have such people in my social environment and generally all decisions I made were without anyone’s participation. […] If you want good advice you should get it from someone who has achieved something. If you follow the advice from someone who is unemployed and on social benefits you will end up like them. (Int. 24, D, insurance agent and investment consultant, male, 39) My main difficulty was that I did not know who to ask for information and what to do in this or that situation. If I had a question, I did not know people to whom I could address this question. This was very problematic. […] I mostly turned to the Internet. Because even people […] who have been living here for a long time could not help me. (Int. 26, insurance agent, male, 32) Entrepreneurship is not a charity. It is not about giving, it is about taking. That’s why you need to be in touch with people who have achieved something. A person who has not achieved anything will not teach you anything. He will only complain about life, questioning why did he move here and how unhappy he is. (Int. 62b, business and tax consultant, male, 43) Ten respondents assigned to the migrant market worked alone and did not have any co-owners or employees. There were different reasons for working alone. Some respondents said that there was no need for employees in their business or that there were no resources to recruit permanent staff as the business was not stable enough. A few respondents also mentioned that they prefer to work

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alone out of fear of opportunism and potential conflicts in situations of tasks and profit sharing. As mentioned by one of the respondents: ‘It is really difficult to work with partners because there is mutual distrust about who has contributed more’ (Int. 18, D, restaurant owner, male, 35). Another respondent who decided to involve a professional business consultant when he was preparing his business plan also mentioned distrust between co-ethnics. This respondent was unemployed at that time and was planning to apply for state funding for self-employment out of unemployment, which required a business plan. As the respondent was not familiar with such a procedure and his knowledge of German was limited, he contacted a business consultant who advertised his business in a Russian-speaking newspaper as being specialised in state support programs for start-ups. When the respondent called the phone number from the newspaper, he realised that it was a Russian-speaking food shop. When he explained his matter, he was asked to leave his contact details and was contacted in a few days by a business consultant who asked him to meet in a café. The respondent got suspicious that the business consultant apparently did not have his own office and there was lacking transparency about what exactly his business was. Nevertheless, he paid him for writing the business plan, which the respondent considered to be unprofessional, incomplete, and inaccurate and was rejected by the start-up funding program. According to the respondent, the business consultant strategically exploited his co-ethnics who were in a difficult situation in different parts of Germany: I have not met other people like that in Germany. This was the first person that I met who managed to weave a web. He knows Russian-speaking people who get clients for him. […] He is like a spider sitting and weaving

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his web. He is one of a few people in Germany who operate on such a large scale. Generally, you cannot make much money in this business with Russian-speaking migrants. But if you span over the Russian-speaking community in the whole of Germany, then you can earn a lot. And somehow he succeeded. (Int. 27, D, several failed businesses, male, 48) Financial and practical support from family and kin were important for most respondents, especially in the early stages of business formation. Families of FSU ethnic Germans are generally characterised by a relatively high level of intergenerational solidarity including financial support between parents and adult children (BaykaraKrumme 2008; Vogel 2012; Sommer & Vogel 2016). Resources provided by strong ties can partly compensate for disadvantaged status of migrants (e.g. problematic access to bank loans) or increase chances of survival in a competitive market, for example, by involving unpaid, flexible, and trusted labour from family and relatives (e.g. Portes & Zhou 1992; Sanders & Nee 1996). Strong ties are associated with problem solving (Ulhoi 2005). According to family cohesion hypothesis (Baykara-Krumme 2008), the ‘migration process intensifies family relationships in order to compensate for the loss of social networks in the country of origin and the lack of resources in the host country’ (Vogel & Sommer 2013: 787). Family businesses were, however, relatively rare, and out of five family businesses assigned to the migrant market, in three cases the co-ownership was restricted to financial investment with no active involvement in the business process. Further, only two businesses had family members among formal employees. However, most businesses received occasional informal support from family members and relatives, especially in the early stages of their entrepreneurial carrier.

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Four business-related types of support provided by family members were mentioned by respondents:

  



Financial support (e.g. contribution to start-up costs, loans, or financial gifts in times of low liquidity) Labour help (e.g. occasionally helping out in the shop or office) Practical help with services that are associated with additional costs and usually involve external contracting (e.g. office renovation, design and distribution of flyers, help with bookkeeping, driving services) Emotional support

Also, friends and acquaintances were an important pool of resources for respondents. Apart from co-ownership, the following four types of resources from personal non-family social circles were mentioned:    

Financial support Occasional informal labour on demand Professional practical help Professional advice and information exchange

Resources provided by friends and acquaintances usually differed with regard to certain aspects from those provided by family and relatives. Financial support, for example, was only provided as loans, while family members in some cases contributed to the startup costs by making financial gifts. In general, bank loans were not common among respondents involved in migrant market businesses, and loans from people they knew (especially family) were preferred not only because the bank loans were hard to obtain but also as a strategy to get a loan without (or with low) interest at more flexible conditions than offered by banks. Although there are some

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clear advantages of private loans, some respondents mentioned potential downsides as well, such as perceived increased pressure of business maintenance even if business is not going well and accumulating debts over time, as mentioned by a restaurant owner: I never considered it (a bank or a state loan) just because I didn’t want to owe them anything. I mean it is always easier to make arrangements with people you know than to deal with the state. […] I have people that lend me money with pleasure and no problems. But I have a responsibility towards them. They believed in you and gave you money for business development. You cannot disappoint them and say ‘It didn’t work out’ and close down your business. It is difficult, psychologically difficult because people trusted you. […] We were borrowing money, some money here and some money there, as we didn’t have our own savings. And this is why we have difficulties now. Because sometimes there are tough times and not enough customers. […] But we have bills to pay. We don’t always manage to get the necessary sum and then we need to ask for a loan again. And this is the main difficulty, as all these old debts are pulling you backward and it is very difficult to escape from this debt hole. (Int. 18, D, restaurant owner, male, 35) Although bank loans were very rare, respondents were well informed about state funding opportunities, such as a start-up subsidy (Gründungszuschuss) and ‘bridging allowance’ (Überbrückungsgeld) for self-employment out of unemployment, and most respondents unemployed before starting their business made use of them. Friends and acquaintances provided occasional labour help to a lesser extent than family members, and although they were not for-

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mally hired, they often received a payment for their work. This informal practice was usually a response to dissatisfaction with the formal employment system that was perceived as inflexible, highly bureaucratic, and disadvantageous for small business because of inflexibility to hire labour occasionally short-term on demand. Occasional informal ‘helpers’ were temporary recruited on demand via recommendations from own social circles by businesses that did not have resources or did not have a need for permanent staff. Only ‘trusted’ people were involved in these informal practices and they were usually people respondents knew personally or referrals by friends and trusted acquaintances. The following scenario from a self-employed respondent involved in multiple businesses is an example of such a transitive responsibility strategy: I try to work alone. I don’t have any employees. If I need a staff, then I get them. […] For example, if I need someone to work for two weeks to unload the lorry and pack everything, I hire a person and he works. I find them through my own channels. […] Through people I know. Then you have someone you can make responsible for it. (Int. 37, D, multiple businesses, male, 27) Apart from referrals, direct access to downward social capital within the migrant community (co-ethnics in lower social positions, especially unemployed) was another resource for hiring of informal staff. Despite the high degree of informality of such recruitment practices that involve trust, the relation between the temporary informal ‘helpers’ and the business owners was usually a price-regulated relationship not involving reciprocity. Whereas the range of practical help provided by family members was relatively wide including both professional (e.g. website and flyer design, accounting help) and physical tasks (e.g. office renovation, flyer distribution, or driving), practical help received from friends and acquaintances was mostly professional (e.g. setting up

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a website, bookkeeping). Apart from professional practical help, friends and acquaintances sometimes also provided a resources pool for professional advice (e.g. legal or business advice from selfemployed friends) and were an important resource for staff search. Thirteen interviewed businesses assigned to the migrant market had formally employed staff. Except one business specialised in after-school tutoring and early childhood education that planned expanding beyond the migrant market by hiring Turkish and German staff in addition to the Russian-speaking staff, all employees were FSU migrants. Hiring co-ethnic employees is usual for businesses that are part of the migrant market. Apart from the language aspect that is particularly important for co-ethnic clients, hiring co-ethnic staff also lowers transactions costs by reducing uncertainty as sharing same values and norms makes it easier to predict people’s behaviour (Den Butter et al. 2007). Co-ethnic employees were mostly recruited through personal social circles and/or via recommendations. Although generally most respondents did not mention any particular problematic issues with their co-ethnic staff, one respondent drawing back on his previous experience working with German colleagues mentioned that overlap of work and private life which can be counter-productive for business is more likely among co-ethnic staff: Germans have a different approach. They are not going to spend two hours smoking and chatting. Or go to a café and come back the next day. There are no buddy manners among colleagues. […] No hangouts after work. They (Germans) complete their work, […] they take their salary, and go home. It is much easier. No intrigues, no friendships, no duties or obligations beyond work. (Int. 62b, D, business and tax consultant, male, 43)

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A few respondents mentioned reducing labour costs by employing migrants in disadvantaged positions as a survival strategy. It was, however, perceived as mutual help rather than exploitation whereby the business owners felt that they provide support by offering work and possibilities of a future salary increase. ‘Working together’ in order to increase overall business profit is perceived as a collective benefit, as mentioned by a restaurant owner: You find people who support your ideas and are ready to help you to be able to continue working here. When I was hiring people I always told them: ‘At the current moment this is all I can pay. But if we together manage to earn more, I will be able to pay you more’. […] We all work together for mutual benefit. If I am doing well, you will also be doing well. If I am not doing well, you will likewise. (Int. 18, D, restaurant owner, male, 35) Generally finding employees was not mentioned as an issue except for the care sector where finding professional certified Russianspeaking staff willing to work in the migrant market was a problem. Due to high competition for professional care staff within both the migrant market and the mainstream market, one of the respondents in the care sector expanded his recruitment strategy beyond Germany and engaged in transnational recruitment of care staff from Baltic EU-countries.

5.8 Client acquisition Co-ethnic clients are the main target clientele in businesses oriented towards the migrant market. Orientation towards co-ethnic customers is associated with the principles of transaction costs economics:

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bounded rationality (access barriers to mainstream market, identified demand, economic advantage as compared to native competitors), opportunism (trust and reciprocity-based relationship with clients and business partners), and uncertainty (perceived ambiguity in interaction with other economic actors by inexperienced migrant entrepreneurs whereby reliance of co-ethnic clients and especially clients from personal social circles in the early phase of entrepreneurship facilitates ongoing agency adaptation at relatively low costs). The personal social circle (family, friends, acquaintances) is an important starting point for client acquisition and is particularly relevant for businesses that offer low/middle-skilled Germany-related services to the migrant community. Especially in the early stages of business formation, clientele from the personal social circle enable a certain level of flexibility that is welcomed by inexperienced entrepreneurs that are faced with market uncertainty. Clients within the personal social circle are not only important for financial survival at the beginning of entrepreneurial carrier but also because they are seen as ‘test clients’, and inexperienced entrepreneurs can gain valuable professional experience whereby the lack of experience is often compensated by lower prices or better conditions (e.g. additional service or flexible contracts) than by established competitors. Further, friends and acquaintances can serve as a starting point for snowball referrals. Although most respondents mentioned positive aspects of client acquisition from their personal social circle emphasising its importance for early stages of their entrepreneurship, some interviewed persons, especially those who started a new business in a sector that has already been filled with other competitors, reported scepticism expressed in their own social circles. An interviewed insurance agent revealed how his relatives and friends distanced themselves at the beginning of his entrepreneurial carrier as they feared that he

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would impose his services on them, and there was scepticism about the seriousness of his business: About a year later after I started my work, relatives started showing interest. Friends started showing interest. […] But in the beginning they were scared. Especially my own sister whose family said: ‘Stop, we have insurance and we have a consultant’. And then they called me themselves. And many did the same, especially people I personally knew. But I must say, with friends and acquaintances I didn’t insist because I knew that they can see what I do. […] I mean they realised that I keep on doing my work and slowly they started showing interest. (Int. 26, D, insurance agent, male, 32) The scepticism and distrust were also related to lacking experience in comparison to established competitors as mentioned by an interviewed travel agent who was relatively new (two years) in this highly competitive sector at the time of the interview: When I just started it was very upsetting for me when people who I know did not come to me but went to someone else. I was thinking: ‘Why? People know I started this business but why do they call the others?’ […] And then I understood that I first need to learn, need to be a specialist, and then people will start calling me. (Int. 5, D, travel agency, female, 52) Although migrant market businesses strategically target co-ethnic clientele, co-ethnic clients were generally perceived as demanding. Some of the respondents mentioned that their high expectations did not correspond to the price that they were ready to pay. High expectations were also perceived as related to expected ethnic solidarity whereby clients not only expected better prices or extra service but also flexibility, in terms of reachability outside working hours and providing free help, as mentioned by an IT specialist:

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I have a feeling that Russian-speaking clients expect more from you. […] You are supposed to support each other. You must. And they can call you at 10 in the evening asking you to help them for free. (Int. 1, D, IT service, female, 38) In the beginning of her entrepreneurial career, the above-mentioned IT specialist operated her business as part of the migrant market. With growing experience, her company moved to the mainstream market and she was not willing to provide services at lower costs to co-ethnic clients, but she feared that if she refused she would not get any reciprocal support from them when she needed it: It was difficult (to refuse), very difficult and I was very worried about it. […] I had this feeling — what if I need something in the future and there will be no one to help. (Int. 1, D, IT service, female, 38) Guided by instrumental motivation, the respondent found a way around this problem and started referring these clients to her colleagues who were less experienced and were charging less money: Many people understand this, in fact. I recommend them alternatives. I tell them: ‘You can contact these people, they do not have as much experience in that field as I do, but maybe they will agree to do it for this money. But not me. (Int. 1, D, IT service, female, 38) Some respondents link co-ethnic client expectations of low prices to their financially disadvantaged situations and show understating and willingness to support co-ethnics in the sense of principled motivation, while mentioning that they still earn enough because of the privileged access to this large client base:

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5 Russian-speaking migrant market Our fellow countrymen have less money and they often want cheap things. Everyone knows that house construction is expensive and they don’t want to spend much. They want to save wherever they can. That’s why they negotiate about prices. But we still have earned something. There was always some surplus when all employees were paid. […] We earned good money actually. (Int. 52, W, food shop, about his previous plastering business, male, 34)

Perceived distrust in competence of co-ethnic entrepreneurs and jealousy were mentioned by a few respondents among other challenging aspects of dealing with co-ethnic clientele: I practised on our people. I am honest. They like to complain, even more than Germans. But our people don’t pay. They hate paying. They try to negotiate until the end at every price. […] Our people like to ask, ask, ask, and then go to a German specialist and do it there. Because they think, this is our guy and he is going to make money off of me. […] And the other guy is German and it is OK. But you should not get anything. […] German clients don’t ask how much I earn. They are not jealous that I might have earned more than they get. […] Only qualifications matter. (62b, D, business and tax consultant, male, 43) Respondents who had German customers among their clientele often mentioned difficult access to this clientele, but once it was established they usually reported positive experiences with German customers emphasising that the evidence of professionalism was a decisive factor for them, as mentioned by the following respondent: Germans have a zero point, a moment when a person starts working with you and they have no ideas, like ‘You are probably not doing well and you could not find a job

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and that’s why you started your own business’. They don’t have this. They have a point from which they start counting, and if they ordered something and you completed the order well and on time, you’ll get a second order. This is much simpler than working with our people with their stories and fears that obviously accumulate over time. (Int. 17, D, bookshop owner, female, 43) While in the early stages of business formation, client acquisition is one of the main issues respondents are concerned with, in the establishment phase, when a critical number of clients has been reached, client selection becomes an issue for some businesses as refusals (e.g. if there are no capacities for additional clients or because the self-employed is no longer willing to offer low prices to specific clients) can lead to conflicts or potentially damage business reputation. Referrals by existing clients are perceived as a protective mechanism to minimise the risk of uncertain reliability of clients whereby those who refer are assumed to be liable for the ‘quality’ of their referrals. This sort of ‘transitive responsibility’ was mentioned, for example, by an interviewed tax consultant: ‘Every person who refers a client to me knows that if they bring an idiot they will be made responsible for it’ (Int. 46, D, tax consultant, male, 41). The same principle of transitive responsibility is also applied by entrepreneurs with regard to their own referrals when they refer clients to their business partners or vice versa: One lawyer told me: ‘I don’t care which side will win because I will get my money anyway — either from the client or the insurance. And in principle he is right. But I don’t like his attitude. Why would I need a lawyer who is not fighting for the rights of the client that I referred to him? If I recommend him to my client, my client will tell me later: ‘Who did you recommend me to? I lost the case’. Then it looks like it is my fault, not the lawyer’s fault, because I recommended this lawyer to my client

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5 Russian-speaking migrant market and my client trusted me and went to this lawyer. (Int. 6, D, vehicle appraiser, male, 54)

Advertisement in the Russian-language print media and Internet portals is a potential channel to reach a large number of Russianspeaking clients and extend the clientele beyond the personal social circle or geographically. Apart from traditional advertisement sections, ‘masked’ advertising that appears in the form of articles where experts in a certain area provide information on specific issues but also use these articles to advertise their own business is common in Russian-language print media. Although this strategy was generally effective to gain attention, reputation, and relative prominence in the Russian-speaking migrant community, two respondents who applied this strategy in practice (a vehicle appraiser and a lawyer) reported their negative experiences, which led them to give up this strategy. The main problem was that they received many phone calls from people who were asking for information and advice but did not perceive this as a formal consultation and were not ready to pay for it. Dissemination of advertising flyers and business cards in shops and offices of other FSU migrants is a common strategy being perceived by most respondents as more effective than adverts in Russianspeaking print media, especially if it is distributed in shops whose owners are personally known, as mentioned by one of the respondents in the insurance business: My goal was dissemination in Russian shops. Not in any Russian shop but only my clients’ shops. I did not put any business cards or flyers in places of people who I did not know personally because someone who takes a business card in the shop would probably ask: ‘Who is this?’ And if they are told: ‘I don’t know who it is’, obviously there will be no interest. (Int. 26, D, insurance agent, male, 32)

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Referrals to and distribution of advertising materials of personally known businesses is perceived as transitive responsibility and thereby minimising risk of uncertainty.

5.9 Business-related relationships Multiplex rather than specialised business relationships is a common characteristic of social relationships in migrant market businesses found in studies on migrant entrepreneurship (e.g. Waldinger 2005). In this study all co-owners of businesses assigned to the migrant market were people from friends or relatives circles. Knowing these people well was perceived as a trust guarantee that minimises risk of opportunism and uncertainty. Also business-related relationships with friends from a different, non-competing business area were perceived as important and beneficial for business as, for example, mentioned by an advertising agency owner: There is, for example, Andrey (name changed), who is making music. He is a person working in a different area but he complements our work and helps our product to achieve a better level. And all these things obviously play a huge role, and this is how further development is achieved. (Int. 47, D, advertising agency and graphic design, male, 25) While horizontal social capital within the migrant community was beneficial for client acquisition when clients were individuals, vertical social capital within migrant community was especially important for business-to-business relationships to facilitate information exchange, business cooperation, and access to corporate clients. Migrant market businesses were rarely embedded in formal unions, cooperate structures representing their interests, or formal industry

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networks. The access to formal networks was perceived as difficult due to language barriers and lack of knowledge about regulations of such structures. Traditional corporate structures were usually replaced by informal networks. Most respondents employed in German companies before starting their own business in the Russian-speaking migrant market did not use their social ties with former colleagues or employers for their business as they usually worked in a different industry (and mostly in the low-skilled labour market segment). Exceptions were businesses that offered high-skilled Germany-related services and planned to move to the mixed or mainstream market. Previous employment in the Russian-speaking migrant market, on the other hand, was a source of experience and a valuable resource of business-related social capital for respondents starting up their own enterprises in the Russian-speaking migrant market. Previous employment experience in the FSU migrant market provided respondents with horizontal and vertical ties to co-ethnic business partners and clients that they used for their own self-employment. One of the respondents, an owner of a care services company, reported about his failed experience of setting up a similar business at an earlier time. In his opinion, this business failed because he was previously employed as a certified nurse in a German care institution and did not have experience in working in the FSU migrant market. After realising that he needs a better understanding of this specific market before starting his own business, he decided to work for some time in a managing position in a Russian-speaking care service company. During that time, he gathered the necessary practical experience and got access to relevant professional networks and clients. After leaving the company, some of the clients left with him to become clients in his newly founded company. Most respondents with previous employment experience in the migrant market reported that this experience was especially valuable for them in terms of getting access to clients. However, in some cases when they started

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their own business, a transfer of clients resulted in conflicts with the former employer. Contacts in the migrant community and especially contacts with other self-employed offer business cooperation and joint business opportunities for people with similar interests and no direct competition, especially when they run multiple businesses. Also existing clients, especially corporate clients, are a source of potential business partnerships. One of the respondents who was involved in multiple businesses reported about his previous experience of involvement in the construction business parallel to his main insurance business at that time. The owners of a construction business approached him, and when asked how did they find him, he replied that it was through his insurance job: How do we find each other? Well, we communicate all the time. For example, let’s take this construction company. It is very simple. I had insurance clients who worked in construction companies. And they told me “Let’s start a company. We can do the construction work and you would be in charge of the financial side like bookkeeping and paying salaries. […] Because I had a big client base it was normal that people were approaching me. (Int. 62, D, multiple businesses, male, 60) Different contacting paths to business-related ties were mentioned in the interviews. Five common contacting paths identified in the data are listed below:   

Through acquaintances (either relevant business-related ties in one’s own social circle or referrals by acquaintances) Through former jobs or internships in the Russian-speaking migrant market Via events (‘info days’, cultural and social events, trade fairs)

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5 Russian-speaking migrant market Direct approach of formerly unknown people or companies (e.g. by searching the Internet and the Russian-language migrant media) Via business partner search announcements in the Russian-language migrant media

Several respondents applied strategic networking for business expansion. The following example of a wedding entertainment business demonstrates a case of business expansion and professionalising by strategic networking. The respondent started at first working at weddings on his own. He realised that his success was partly because of his age and qualifications. He was a young professional and most of his competitors were older amateur musicians. The respondent discovered a potential for expanding his business by involving young professional musicians in his business and creating an umbrella brand for professional Russian-speaking wedding entertainment whereby the selling point would be having a big enough pool of professionals offering a wide range of music styles and entertainment. The respondent, although coming from a social environment with contacts to other FSU migrants working in the creative sector, did not have enough contacts to young professional musicians, and establishing professional contacts was an important step to implement his business idea. Since young musicians were difficult to get for jobs in the migrant market as they had enough offers from the mainstream market, the respondent had to actively approach them offering competitive conditions: Our project pushed many musicians to do something. […] They did not do anything because everything was OK for them: they had clients and orders. It was low quality and bad presentation. […] Because there was no competition and high demand. And then our project suddenly was standing out with a good presentation. Young handsome professionals. And because there were

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many of us (in the project) we became a monopoly. The project was developing so fast and the brand name became so popular that prices for our service were increasing. The first sign that the brand was working was that my name started bringing not only one performance per day but two, three, and sometimes even four performances in one day. Without me being there. And my offer to other musicians was to perform in my name (brand name). And this was difficult to achieve because the only way to get it was to offer a very good salary. More than they would get working on their own. And I achieved this. I achieved that it was more profitable for them to work for me than to work using their own names. (Int. 50, D, wedding entertainment, male, 28) By making his competitors his collaborators, the respondent managed to create a network of about 30 musicians working under his umbrella brand that, according to him, achieved a quasi-monopoly status in the region. Another example of strategic networking for business expansion was mentioned by an interviewed owner of a care service company. The owner, who had longstanding experience as a nurse himself, was familiar with the work in the sector through his managing role in another Russian-speaking care company. However, he realised that he needed vertical business ties to various stakeholders (e.g. doctors, insurance companies) in order to be more competitive. He decided to delegate this networking task to a friend, who was a professional in a different sector but had contacts to vertical social capital in the Russian-speaking migrant community, and made him his business co-owner: And then I developed a concept. I had a friend and now he is my business partner. I realised my mistake which

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5 Russian-speaking migrant market was that I should have shared tasks. […] I had to manage the company, serve clients, and search for clients. It was impossible. […] I only realised this one and a half years later. […] And then I got my friend as a business partner. And this friend is not from this sector. He does not know this sector at all but he knows all the doctors. Doctors are his friends. And this is what I needed. He is now in charge of client acquisition. And I serve the clients and work with them. I am in charge of the internal side of the business and he takes care of the external side. After we divided it this way, the business started growing. And that’s why we are so strong in the market now. (Int. 28, D, care service company, male, 33)

Although generally business relationships in the migrant community are among the main features of the migrant market, bounded solidarity among migrant entrepreneurs is questionable. There is high competition in some sectors of the Russian-speaking migrant market, for example among travel agencies, because there is a relatively large number of them in Düsseldorf, or in the care sector because there is a limited number of potential clients and deficit of professional certified staff. In contrast to the principles of boundary solidarity, in sectors with high competition newcomers cannot draw back on support from established businesses as they are becoming their potential competitors as, for example, mentioned by an owner of a travel agency or an interviewed vehicle appraiser: Normally in such a case people are competitors and don’t share any information with you. If I call someone in Düsseldorf, no one will tell me anything. I am sure about it because I am a competitor. (Int. 5, D, travel agency, female, 52) I called him (established vehicle appraiser in Berlin) and he obviously told me ‘I cannot teach you or give you any qualifications’. I told him ‘I don’t need qualifications’. And

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he said: ‘Well, you should understand…’ So I realised that he is not interested. Maybe out of fear of competition, maybe something else. (Int. 6, vehicle appraiser, male, 54) Client hunting and staff luring can result in conflict situations and reputation damaging practices, as demonstrated by an owner of a care service company who was telling about his experience with his former employer who became his competitor after he started his own business: They thought that they were the only company in the market and everyone would go to them because there was no other choice. […] They turned out to be very tough competitors. They were spreading very bad rumours about me, that I am a swindler, a criminal. There was so much they were telling about me. That I was almost bankrupt and that my business has closed, that there was no real business and that it was a fake business. They were telling doctors what a super bad person I am. All possible things you can imagine. That’s why when I was meeting with doctors they were looking with suspicion at me. […] It was very tough. Because they were so rude. They were calling my clients to tell them bad stuff about me and trying to get them as their clients. So practically they were trying to destroy me. […] They were writing anonymous letters and we were getting inspections. It was really tough. […] Competition almost destroyed me. There are people in Düsseldorf who still hate me. Because, first of all, I took half of their clients. (Int. 28, care service company, male, 33) Several other respondents, including a restaurant owner, mentioned the practice of damaging reputations by spreading rumours in the migrant community:

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5 Russian-speaking migrant market Different rumours are being spread. Let’s say you had a conflict with a person related to a certain issue. You tell him that he is incompetent with regard to this or that. And he says: ‘I am not interested. I am leaving’. And then in two to three months such rumours start reaching you that the hairs on your neck stand up, and then you gradually realise where they were coming from. (Int. 8, D, restaurant owner, male, 35)

In general, conflict situations with other businesses were rarely mentioned. Business relationships within the migrant market are characterised by a relatively high degree of informality between small companies. Embedded ties (Uzzi 1997) based on trust and reciprocity are common in the business networks. Formal price-regulated business relationships are common with bigger companies (e.g. wholesalers) as well as with German businesses and institutions.

5.10 Examples of business networks in migrant market In the following section two examples of self-employed in the migrant market (a travel agency in Düsseldorf and a Russian food shop in Waldbröl) are illustrated using the network maps that were collected during the interview. Travel agency example Figure 5 shows the business network map of a respondent involved in tourism in Düsseldorf. At the time of the interview, the respondent was 52 years old and had been running her business for two years.

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Figure 5: A business network of a travel agent in migrant market

Note: Circles indicate individuals, squares indicate groups of people or organisations.

Before becoming self-employed, she was employed in a German electronics company for about 10 years. She had a university degree in engineering from Russia and migrated to Germany with her family as an ethnic German in 1996 at the age of 37. After becoming unemployed, she decided to open her own business in the travel sector, although she did not have any prior experience in this sector. She received a 20-month training course in tourism business offered by the Chamber of Industry and Commerce as part of the employment agency intervention program for unemployed above 50 years old that she was still attending at the time of the interview. Her startup was subsidised by a state program supporting self-employment

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out of unemployment. The employment agency, the training course, and the Chamber of Industry and Commerce were perceived by the respondent as a link to business-related contacts outside the migrant community. While this part of her network is formal in nature, the other parts of her network are mostly characterised by a relatively high degree of informality. Mainly due to language barriers, the respondent decided to focus on Russian-speaking migrants in Germany as her main target client group, selling Russian-speaking guided tours to various places in Germany and other European countries. She did a one-month internship in a Russian-speaking travel agency to prepare herself for her own self-employment. She also tried to get in touch with established Russian-speaking travel agencies in Düsseldorf in order to get some information and practical advice, but because of high competition in this sector, she was denied any support until she contacted an FSU migrant running a travel agency in a different region in Germany (‘advising travel agent’ in the Figure 5) via Russian-language online social media: She had never seen me before, never heard about me. But when I called her we realised we had so many things in common. We are both from Siberia, ethnic Germans, same age, same goals. She also worked in a different area before. […] After a week or so I came to visit her. […] She showed me how to do some things. She was also relatively new in this sector but nevertheless she promised to help me. We became friends. We call each other if she needs something or I need something. Our relationship is based on trust. Because normally in such a situation people are competitors and keep what they know for themselves. If I call anyone from Düsseldorf, no one will tell me anything. […] Because I am a competitor. But this woman lives in a different region. I am not a competitor for her and she is not a competitor for

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me. […] She helps me because she was once in the same situation as me. Her advantage was that she had been working in a Russian-speaking travel agency for two years before and she had a large base of offers. I can buy some tours from her because I cannot afford to have my own large base. […] It is a win-win situation for both of us. She receives information from me that she has not known before and I use her base. That’s why I consider her my business partner. (Int. 5, D, travel agency, female, 52) This example shows selectivity of ethnic solidarity and its limitations in competitive settings questioning principled motivation behind ethnic solidarity. In the sense of bounded rationality that aims at optimisation under constrains, being unable to cooperate neither with German companies due to language barriers nor with migrant Russian-speaking travel agencies due to high competition in this sector, the respondent approached someone whom she did not know herself or was referred to by others to enable intra-community ‘jumping’ after a failed attempt of upward intra-community networking. As can be seen in Figure 5, the ‘advising travel agent’ has a central role in the part of the network related to client acquisition and other tour operating companies. Although the respondent said that the willingness of the other travel agent supporting her was based on the similarity of their life situations, she emphasised that both of them obtain advantages for their business from this reciprocal relationship. Principled motivation might have been in place behind the motivation of the respondent’s contact to start a social relationship with a person in a lower hierarchical social position but instrumental motivation enabled further development of a more balanced business-related partnership which demonstrates a dynamic nature of social ties that can change for the same dyad over time (as in this case from a vertical to horizontal tie).

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The respondent prefers clients from her own social circle or clients by recommendation because of the limited capacities due to her part-time self-employment (as she attends a daily training course in the mornings) and because of the way she deals with monetary transactions that requires a certain degree of trust and informality: I prefer to deal with people that I know because it is easier for me to work with them. Because it is based on trust. […] You need to have a very good base if you want people to pay you in advance so that I can have their money in my account. And without it I don’t know if they transferred the money or not. At the moment, it is all based on trust. Very often I am paying before I receive the client’s money, and this is something I cannot do with people I don’t know. (Int. 6, D, travel agency, female, 52) Apart from client acquisition in the Russian-speaking community, the respondent also uses an intra-community linking strategy and shares the same tax consultant and lawyer with one of her friends who is self-employed in a different sector and who referred them to her. Although the majority of her clients are from the Russian-speaking migrant community in Germany, some clients are tourists from Russia or other FSU countries coming to visit Germany. The respondent advertises her business in the Russian-language social media forwarding this information to all her existing online contacts in Germany and Russia. Whereas in the beginning, the majority of such occasional clients from Russia were weak ties from the respondent’s personal transnational social circle, additional clients from the FSU countries started contacting her mostly by recommendations later. The respondent sees this development as an additional market advantage and a possibility to gain more autonomy from the Russian-speaking entrepreneurial community in Germany and plans to intensify her transnational entrepreneurial activities in

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the future by directly approaching travel agencies in Russia as potential business partners.

Food shop example The second example shows a network map of a 34-year-old Russian food shop owner in Waldbröl who had been operating the shop for 11 years at the time of the interview. The respondent came to Germany at the age of 13. After finishing school, he completed an apprenticeship as an electrician but did not work in this profession and started instead his own business in the construction sector as a plasterer. In the beginning of his self-employment in that sector he was working for a German client who referred him to a supplier of machine-applied plaster in Hamburg from whom the respondent was buying the material at a good price and resold it in his region. The German client who referred the respondent to the plaster supplier served as a reliability guarantee as the respondent was relatively young at that time (21 years old), and apart from that he could not pay in advance for a large amount of plaster he was buying. The supplier had to trust him that he would receive the money when the respondent resold the plaster. Although the respondent started his first self-employment as plasterer in the mainstream market, having mainly native clients, he realised that there was a demand for construction work and materials among ethnic German families in his region as many of them were building houses at that time. In response to this demand, the respondent moved his business from the mainstream market to the mixed market. In total, seven people were working for the respondent in his construction business, including his father and brother.

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After two years the respondent gave up the plastering business because he perceived it as hard physical work. The respondent decided to remain self-employed but changed sectors. He wanted to attend a commercial training course but the employment agency was not supportive of his wish and referred him to a two-year industrial mechanic training course instead. After one year, the respondent gave up this training course to start his new business as a food shop owner. He was approached by his father who informed him that the property where the language school and the integration centre for ethnic Germans was previously located was for sale and suggested buying this large property to use it for a joint business. They decided that given the size of the property it was suitable for a supermarket. As there were no supermarkets specialising in East European food at that time in Waldbröl, the respondent discovered a market gap that he was willing to fill. The location was strategically chosen because it was well known among ethnic Germans in Waldbröl. As the property was relatively large, a few other FSU businesses (e.g. a travel agency) also located their offices there. Although the supermarket has some German clients, it mainly serves the FSU ethnic German community. The main reason for entering the migrant market was not related to ethnic preferences but to economic opportunities such as a competition-free niche with a relatively high demand from a large group of locals who have relatively big families. Although most suppliers of the supermarket are FSU migrants, some non-FSU regional suppliers (German, Turkish, Greek) supply meat and vegetables. In the start-up phase, the respondent did not receive any support or advice and was mostly managing everything on his own. Although his father was a co-owner of the shop and made a financial investment in the shop, and also worked there, it was respondent’s responsibility to purchase products and establish contacts with suppliers. Because he was inexperienced in food retail, the shop had a

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deficit at the end of the first year. Then the respondent met an owner of three Russian food shops in Cologne at the wholesale market with whom he became friends and who started supporting him with advice and information: I met someone in the wholesale market and he called me. He is a very good friend now. And now he is a wholesaler himself. When I met him he had three Russian shops in Cologne. Big shops. And he taught me many things like what I should do to avoid making mistakes. […] How to calculate percentages and the markup. How to complete papers for the tax office. […] Because he has been in this business for a long time he taught me a lot. And I followed his advice and then there was a surplus. And the performance of the shop has improved more and more. (Int. 52, W, food shop owner, male, 34) This friend also referred the respondent to other wholesalers and suppliers and became the central actor in the respondent’s business-related network (‘Advising friend’ in Figure 6). Over time the respondent and his friend built up a reciprocal relationship supporting each other’s businesses. The friend who became a wholesaler and now supplies products to the respondent’s shop offers him better prices in return for the respondent’s help with selling one of his shops: Some time ago I helped him to sell a large shop. I got one of the clients so excited and he then bought this shop very quickly. And he (the advising friend) told me at that time: ‘If you help me, you’ll have a ‘credit’ that I’ll give you’. And I still have this ‘credit’. […] He still reminds me: ‘You helped me back then, now you get the best prices’. (Int. 52, W, food shop owner, male, 34)

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Figure 6: Business network of a food shop owner in migrant market

Note: Circles indicate individuals, squares indicate groups of people or organisations.

The respondent’s business network is characterised by a mixture of formal price-regulated business relationships and embedded ties involving trust and reciprocity. Except the respondent’s father, other actors in his business network are not based in Waldbröl. Most actors in his network are regional suppliers and wholesalers. The respondent was not able to name all of them due to the relatively large and varying number that accumulated during over 11 years of his

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business activity, and they had to be depicted grouped in his network map (‘Suppliers’ in Figure 6): There are so many. I don’t know. I never counted how many suppliers we have. I think we have certainly more than 20 suppliers. And names — oh no, don’t ask me. (Int. 52, W, food shop owner, male, 34) In general, the network is a mix of a few big and many small companies. The respondent has never met many of them in person and only spoke to them on the phone. At first, the respondent had some difficulties in finding reliable suppliers but over the years, with the help and recommendation of his advising friend, he established a stable supplier network for his business. The respondent had a price-regulated formal relationship with most of his suppliers, but he became friends with some suppliers over the years and the relationship with them moved from a formal price-based relationship to a trust-based relationship going beyond a business-only relationship. In such cases, not the ethnical background but the long-term business-related relationship was a base for trust development contributing to perceived reduction of risk of opportunism, as shown in the example of a relationship with a German meat supplier who was referred to the respondent by his advising friend: I have a German supplier who has been supplying us with meat for 10 years. And I sell a lot of his meat. […] And we are now good friends. For example, if I did not have enough money today and urgently needed products, I could take as much as I want. The trust is simply there. It doesn’t matter if it is 1,000 or 15,000 Euro. He would sell it to me with blind eyes and would not have any worries. Because we have a proper friendship now and the trust is there after so many years. He knows 100% that I will not take advantage of him or use him somehow. He knows that for sure. And I know that he

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5 Russian-speaking migrant market would never let me down if I am not doing well. (Int. 52, W, food shop owner, male, 34)

In the respondent’s opinion it is in general common for ethnic Germans to help each other in the sense of principled motivation of ethnic solidarity, and he is offering his advice to others who approach him: We support each other. One hand washes the other. You give what you can and you say: ‘I made these mistakes. You should not repeat them. You should do this and this better. And this and this is right‘. (Int. 52, W, food shop owner, male, 34) At the time of the interview, five people were employed in the shop, all of whom were FSU ethnic Germans. The respondent’s father had retired and was helping out in the shop sporadically. Because the respondent is present most of the time in the shop, he is well known in the local FSU community, but he finds it stressful being recognised and approached in the street by his customers. Despite having staff, the respondent prefers to do all the buying himself because in his opinion his employees do not get the same favourable conditions in the wholesale market or when dealing with suppliers on the telephone: I used to send an employee to the wholesale market in Cologne to buy fruits and vegetables. And he was getting rubbish. Or it was too expensive and you cannot sell it here. He is getting the same things more expensive. If I go there, they treat me with respect and I get different prices. It is like this everywhere. If they (employees) order something for me on the telephone, they get bad prices. If I call them (suppliers), then they say: ‘Respect, Alex (name changed). We are giving you good prices’. I don’t know why it is like this. No idea. But my presence

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is required all the time. (Int. 52, W, food shop owner, male, 34) In the respondent’s opinion his customers also expect him in the shop (‘I belong 100% to the inventory’). His required physical presence in different places and working long hours are perceived by the respondent as obstacles, making it difficult to combine work and family life. This is one of the reasons why the respondent was considering giving up his supermarket business, although it was going well, and starting a new business. Another reason for starting a new business was that he was getting bored doing the same business for a long time, and he was looking for new challenges. Being a flexible sector switcher, he was looking for new economic opportunities. At the time of the interview, the respondent was thinking about opening a business in the wellness sector, seeing economic potential as there were no competitors in the region. When the author revisited Waldbröl in 2012, the food shop was closed down and there was a job advertisement for care and nursing services staff on the shop’s front door.

5.11 Conclusions The chapter provided an overview of types of businesses that are prevalent in the Russian-speaking migrant market. While there is a well-established self-sustaining Russian-speaking migrant market with a wide range of offered products and services in Düsseldorf, businesses specifically targeting co-ethnics as main clients are rare in Waldbröl. Most interviewed businesses assigned to the migrant market strategy provided non-ethnic Germany-related services. Due to the specifics of the migrant market, only co-ethnic staff was employed by all businesses except one. Reliance on strong ties from personal social circles was particularly important in the start-

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up phase and was associated with problem solving. The personal social circle was also a valuable resource for client acquisition for some businesses. Referrals from personally known contacts, transitive responsibility, and co-ownership with family members and friends were common strategies to cope with the risk of opportunism and uncertainty. Previous experience of employment in the Russian-speaking migrant market before starting own business, was a valuable resource to get access to clients and relevant businessrelated contacts in the migrant community. In general, the interviewed migrant market businesses mostly relied on social capital from the migrant community. Intra-community business-related relations were mostly embedded ties involving reciprocity. Further, relationships with co-ethnics were characterised by a relatively high degree of informality. Business-related relations outside the FSU migrant community were limited to the necessary formal price-regulated relations (arm’s-length ties) with German providers and institutions. In contrast to private social relationships, business-related social relationships are strategic functional relationships that provide entrepreneurs with resources for their businesses. Findings from this chapter question the concept of natural ethnic solidarity, showing that access to certain types of resources (e.g. information) can be limited due to competition in the migrant market. Ethnic solidarity and reciprocal relations were guided by instrumental motivation rather than principled motivation. Especially in sectors with high competition within the migrant market, established co-ethnic companies were reluctant to provide support for newcomers. Further, several respondents mentioned that while horizontal weak ties in the Russian-speaking migrant community were relatively

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easy to obtain when they arrived in Germany, they experienced difficulties getting access to vertical upward ties in the migrant community that could be beneficial for their self-employment. Attending business-related information events organised in the Russianspeaking community was perceived as an opportunity to get access to intra-community vertical capital for new comers. At the same time, such events foster exchange between co-ethnic self-employed and enable intra-community bridging between different FSU migrant subgroups. Transnational social capital was not relevant for most of the interviewed businesses assigned to the migrant market as most businesses offered Germany-related services. In case of businesses offering ethnically associated products, the products were mostly purchased in Germany due to high import fees from non-European countries. Transnational social capital was, however, used by some businesses as a complementary strategy to achieve additional competitive advantages. There are different motivations for starting up a business in the migrant market. While some respondents saw the migrant market as an opportunity to cover a demand for certain products and services in a niche with a relatively low competition or a possibility to be closer to their migrant community, the motivation of other respondents was linked to the challenges of bounded rationality and difficult access to the mainstream market. Some respondents were planning to use their experience in the migrant market as a trial before moving to the mixed or the mainstream marke

6 Mixed market businesses Several recent studies have demonstrated that only a portion of migrant businesses relies exclusively on the migrant market predominantly targeting co-ethnic clientele (e.g. Leicht & Werner 2013; Rusinovic 2006). While some migrant businesses are predominantly embedded in the migrant economy, many migrant businesses operate in the so-called ‘mixed economy’ (Nee et al 1994). The mixed market can be seen as the middle point of the ‘market continuum’ (Figure 7) where the extreme points of the continuum represent migrant businesses that are either entirely embedded in the migrant economy (migrant market) on the one side of the continuum and businesses that do not have any specific functions in the migrant community (mainstream market) on the other side of the continuum. The distinctive characteristics of the mixed market are mixed clientele and the use of both ethnic and non-ethnic resources for the business (Nee et al. 1994). It is common for migrant businesses initially operating in the migrant market to expand their activities to a broader market than the initial entry market over time (Engelen 2001; Rusinovic 2006). Potential economic growth of migrant market businesses is often restricted by saturation effects (Jones et al. 2000; Kloosterman 2010). The ‘break out’ of the migrant economy, by expanding the customer base to the population at large, is associated with economic potentials that are not available for businesses ‘trapped’ in the migrant market (Barrett et al. 2001; Waldinger et al. 1990). Although it is generally assumed in the migrant entrepreneurship research that migrant entrepreneurs rely on ethnic resources to compensate for a lack of other resources (e.g. human or financial capital), recent studies demonstrate that high-skilled migrants also do not abstain from using ethnic resources and use a combination of different types of

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 E. Sommer, Social Capital as a Resource for Migrant Entrepreneurship, https://doi.org/10.1007/978-3-658-29141-9_6

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resources to exploit promising business opportunities (e.g. Leicht & Werner 2013; Rusinovic 2006). Whereas it is generally assumed in migrant entrepreneurship research that ‘break out’ to the mainstream market provides migrant entrepreneurs with better economic potentials than the migrant market, targeting co-ethnic clientele as an additional client base is strategically applied by some migrant businesses that operate in the general population market to achieve competitive advantage over native businesses. As stated by Engelen (2001: 218): ‘flaunting economic assimilation as the goal of economic incorporation’ overlooks ‘the economic potentials of “ethnic” strategies’.

Figure 7: Market continuum – mixed market

Source: Own figure.

6.1 Overview of interviewed mixed market businesses

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This chapter illustrates how social capital is used by businesses operating in the mixed market. The first section provides an overview of interviewed businesses assigned to the mixed market. It is followed by a section focusing on the main characteristics of social capital used in mixed market businesses. The third section presents strategies found in the interview data of getting access to native clients enabling shifting from migrant market to mixed market. It is followed by a section focusing on businesses that initially started their business in the mainstream market but moved to the mixed market after identifying economic advantages arising from targeting co-ethnics as an additional client group. An illustrative example of an entrepreneurial network in the mixed market and a brief summary of findings conclude the chapter.

6.1 Overview of interviewed mixed market businesses Out of 65 interviewed self-employed, 17 were involved in economic activities simultaneously targeting co-ethnic clientele and the general population. The criteria for assigning a business to a mixed market in this study is a substantial proportion of co-ethnic and non-coethnic clients whereby the business targets a broader market beyond the migrant market but strategically includes co-ethnic clientele to gain additional competitive advantages. Table 6 provides an overview of businesses operating in the mixed market. Most interviewed businesses assigned to the mixed market in this study (11 businesses) are established businesses (see Table 6 and Table 7). It is common for migrant businesses to start operating in the migrant market and move to a broader market as part of the ‘break out’ (Barrett et al. 2001) at a later time point of business development. While six businesses started out as mixed market businesses, eight businesses started as migrant market businesses and

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expanded the extent of the target market in the establishment phase. Three markets started their economic activities operating in the mainstream market but strategically turned to co-ethnics as an additional target group at a later time point after realising additional economic gains of inclusion of this specific client group.

Table 6: Overview of interviewed mixed market businesses

Int BusiNr ness

Music 8 education Mas11 sage service Translation service 13 and language courses Car 16 repair service

Status

Initial Remarquired ket skill stratlevel egy

ForMiCoGenmal grant Age** ownder staff group* ership ***

StartHigh up

Mixed OM market

F

31 No

No

EsLow/ tabmiddle lished

Migrant EG market

F

56 No

No

EstabHigh lished

Migrant OM market

F

33 No

No

EsLow/ tabmiddle lished

Migrant EG market

M

42 No

Yes Ethnically mixed

Migrant JM market

F

30 No

No

Music perforEsmances 19 tabHigh and edlished ucation

6.1 Overview of interviewed mixed market businesses

Int BusiNr ness

Status

Initial Remarquired ket skill stratlevel egy

179

ForMiCoGenmal grant Age** ownder staff group* ership ***

EsMedical 21 tabHigh practice lished

Mixed EG market

Antivirus 29 software trade

Given High up

Migrant JM market

Print 30 design

EstabHigh lished

Mainstream EG market

F

52 No

Yes German staff

M

Yes 46 FSU friend

Yes Ethnically mixed

M

Yes FSU 61 family member

Yes FSU family member

F

Yes FSU friend and 39 former German colleague

Yes Ethnically mixed

PsychoStart39 High therapy up centre

Mixed JM market

EstabHigh lished

Mainstream EG market

F

63 No

Yes Ethnically mixed

Low/ Esmiddle tablished

Mixed EG market

M

32 No

No

Plastering Given Low/ 52 busiup middle ness

Mainstream EG market

34 No

Yes FSU family members

Phar41 macy

51

Car trade

M

180

6 Mixed market businesses Initial Remarquired ket skill stratlevel egy

Int BusiNr ness

Status

Car 53 repair service

EsLow/ tabmiddle lished

Wedding Start- Low/ 55 dresses up middle shop

ForMiCoGenmal grant Age** ownder staff group* ership ***

Mixed EG market

M

Mixed EG market

F

Start- Low/ up middle

Migrant EG market

F

Fireplace Essale Low/ 59 taband furmiddle lished niture retail

Migrant EG market

56

Fitness studio

M

38 No

Yes Ethnically mixed

Yes FSU Yes 50 former FSU colstaff league Yes Yes Ethni50 FSU cally friend mixed

33 No

Yes Ethnically mixed

Yes FSU Yes M 45 family FSU mem- staff ber Note: *EG – FSU ethnic Germans, JM – FSU Jewish migrants, OM – other FSU migrants; **Age of the respondent at the interview; ***Formal staff including freelancers. Car 60 tyre retail

EsLow/ tabmiddle lished

Migrant EG market

Twelve businesses assigned to the mixed market strategy are businesses run by FSU ethnic Germans (Table 7). This strategy was particularly common among FSU ethnic Germans in Waldbröl where seven out of ten interviewed businesses were operating in the mixed market. While businesses targeting mainly the migrant community are relatively rare in Waldbröl as compared to Düsseldorf, given the

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181

relatively high spatial concentration of FSU ethnic Germans in Waldbröl, having co-ethnics among clients is usual for local businesses there even without a specific goal of targeting co-ethnics. Table 7: Summarised overview of interviewed mixed market businesses

Ethnic Germans Required skill level Low/middle-skilled businesses High-skilled businesses Business status

Jewish migrants

Other FSU migrants

Total

9

0

0

9

3

3

2

8

2

1

1

4

9

1

1

11

1

1

0

2

Female

5

2

2

9

Male

7

1

0

8

Start-up Established (>5 years) Given up Respondent’s gender

Respondent’s age at the interview 50 years old

4

0

0

4

12

3

2

17

Total

Mixed market businesses were common to a similar extent among male and female respondents as well as in low/middle-skilled and high-skilled sectors (Table 7). Compared to interviewed businesses

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6 Mixed market businesses

assigned to the migrant market strategy, start-ups out of unemployment were less common in mixed market. Especially among interviewed female owners of mixed market businesses, it is common that they become self-employed in the same sector where they have previously worked for several years. Some of them got an offer to ‘take over’ the business from former retiring employers. Their previous work experience in the same sector enabled them access to professional networks and relevant institutions and their business networks consisted mostly of specialised formal relationships. Mixed market businesses were more common among interviewed FSU ethnic Germans (12 businesses) than among Jewish migrants (3 businesses). This can be partly contributed to high proportion of mixed market businesses in the Waldbröl sample (7 businesses) which only consists of FSU ethnic Germans. The youngest respondent operating business in the mixed market was 31 years old and the oldest 63 years old at interview. Respondents in in the mixed market were generally younger than respondents in the migrant market but older than respondents in the mainstream market. Compared to migrant market businesses, it is more common for mixed market businesses to have ethnically mixed staff. Only five businesses assigned to the mixed market did not have any formal employees. Out of 12 businesses with employees, seven businesses employed ethnically mixed staff (Table 6). Co-ownership, however, is more common with FSU migrants: out of six co-owned businesses, only one business had a native German co-owner.

6.2 Use of social capital in mixed market businesses

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6.2 Use of social capital in mixed market businesses With regard to use of social capital, there was no particular differences between mixed market businesses in low/middle-skilled and high-skilled sectors. Therefore, they are treated together in this chapter. Similar to interviewed businesses assigned to the migrant market strategy, interviewed self-employed operating in the mixed market often relied on strong ties from their personal social circle in the start-up phase of business formation. Financial support provided by family members was typical for this subgroup of businesses. Further, occasional practical help (e.g. support with bookkeeping or website maintenance) provided by relatives was relatively common. As mentioned by an interviewed owner of a fireplace and kitchen furniture retail shop, mutual support or family members is perceived as important and a common practice in FSU migrant families: I receive regular help from my family. It would not be possible without it. And from my wife. Employees come and go but brother remains brother, and mother remains mother. […] You can write it in capital letters that Russian-speaking self-employed have a huge advantage because we receive help from our relatives. Also financial help. And they work a lot for free. They provide help in the beginning. Imagine if I had to pay for everything from the start. For example, my brother set up the online shop. He worked so many hours to help me. Or help with renovations and other small works. And there is no payment for that. Even if I tried to give them 10 Euro, they would say ‘What?’ Even when they were on social benefits. […] That’s why I try to make sure that my wife and my brothers understand everything in my business (they do not work in the respondent’s business as formal employees) so that in case something happens to me the business can continue and there is no need to give it up.

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6 Mixed market businesses Because it is a successful business at the moment. (Int. 59, W, fireplace and kitchen furniture retail, male, 33)

Support from co-ethnic friends and acquaintances usually had a form of information exchange and professional services at lower prices. At the same time, use of weak ties to host population from the network of industry (Drori et al. 2009), mostly resulting from previous jobs and education in Germany, was commonly employed as an additional channel of resources, especially for client acquisition and staff recruitment beyond the migrant community. Targeting the FSU community alongside the general population was perceived as an important factor of business development, providing a competitive advantage to German businesses, as explicitly mentioned by an interviewed owner of car tyre retail business: We have clients coming to us from Cologne. These are clients who travel to us just because of the language. […] We definitely have a competitive advantage […] compared to our German competitors who have run their businesses for generations here. (Int. 60, W, car tyre retail, male, 45) Compared to interviewed migrant market businesses, however, client acquisition from personal social circles was less common for mixed market businesses. Several respondents reported about negative experiences of having clients from personal social circles resulting in conflicts of entrepreneurs’ self-interest and expected solidarity, as mentioned in the following quote: It is always difficult to have relatives and friends as clients. […] I had more conflicts and issues with relatives and friends as clients than with clients that I personally did not know. I have been asking myself for a long time

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185

why is it like that. And then I understood one thing. People that come to my shop pay for a fireplace, for example 6,000-7,000 Euro. It is a lot of money. I make a ‘relatives price’ for them. The fireplace usually costs 9,000 Euro but I sell it to them for 6,500 Euro. I make the price lower for them. I sell it to them at wholesale price. But people buy it and think that I owe them something. Because it is a lot of money. They think they did me a favour. […] They did not understand that it was actually a loss-making deal for me. […] They did not understand that I did not make any money with this transaction. They think that I put these 6,500 Euro they paid in my pocket. (Int. 59, W, fireplace and kitchen furniture retail, male, 33) Despite admitting the important role of co-ethnic clientele as business advantage and strategically targeting this group, co-ethnics were usually perceived as more demanding clients than German clients. The expectation of lower prices due to shared migration background was especially mentioned in several interviews. Several respondents reported about perceived pressure of expected ethnic solidarity and were relenting in the early stages of their business formation, seeing it in the sense of instrumental motivation (Portes & Sensenbrenner 1993). It was not seen as exploitation, but rather as a chance to establish links with the migrant community that could be beneficial for their business development in the future, as demonstrated in the following quote: They want to save money on everything. Even in areas where it is not possible. Saying: ‘You know us, we know each other’. Sometimes they even think you will do it for free. At the beginning they were using me, and also many other people. But I did not perceive it as exploitation but as my duty and my chance to show myself, to make myself known. But some people remain too long in this stage. I think many people have had this problem. […] Now it is better for me to do it either completely for

186

6 Mixed market businesses free, as the Jewish saying mitzvah — a good deed — or if I do it professionally I expect professional pay. (Int. 19, D, music performances and music education, female, 30)

Compared to migrant market businesses, advertising business in the Russian-language print and online media is relatively rare among mixed market businesses. Acquisition of co-ethnic clients usually happens through word-of-mouth advertising and via participation in Russian-speaking social events. Out of 17 interviewed mixed market businesses, six businesses started their business directly as mixed market companies. Some of these businesses were ‘take over’ businesses that were able to keep clients of previous business owners who were Germans (e.g. pharmacy, medical practice, wedding dress shop). Among other channels for German client recruitment were recommendations from existing clients, listings of professional businesses (e.g. official lists of medical doctors or certified translators), online advertising, as well as volunteering and local sponsoring. Another common strategy to get access to clients outside the migrant community was recruitment of German staff to work with German clients. Especially in the early stage of business formation, former German colleagues (professional weak ties) were hired as employees. ‘Small world recruitment’ in early stages of business formation is a common phenomenon not only among migrant business but also among businesses in advanced economies in general (Aldrich & Kim 2007). To quote Aldrich & Kim (2007: 160): ‘Small world recruitment is the nearly invariant form of start-ups. […] Almost all start-ups assemble teams based on embedded ties from pre-existing relations within clusters’. Restricting team formation to known and trusted actors is perceived as a way to reduce risks of opportunism and uncertainty. Bridging to outsiders is ‘empirically unusual’

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187

(Light & Dana 2013: 8) for start-ups and generally happens in the establishment phase when businesses become more diversified and instrumental (Chen 2011; Light & Dana 2013). Generally, the longer the interviewed business was at the market, the more often formal channels for staff recruitment through job advertising and employment agencies replaced recruiting staff from personal social circles. Eleven out of twelve mixed market businesses with employees had at least one co-ethnic staff member. For some businesses this was a strategic decision in order to have staff taking care of FSU clients. Co-ethnic staff was often hired through own social circle either from the professional network (former colleagues) or from the personal network (family members and friends) in the early stages of business formation. With the exception of family businesses, employing co-ethnic staff from relatives and friend circles was often perceived as problematic due to role mixing, and, therefore, hiring preference was given to professionals using formal recruitment channels in the business establishment phase. The following two interview excerpts illustrate conflicts arising from mismatch of economic self-interest and expected solidarity: Int. 60: There are situations where you should favour the economic aspect over the human aspect and you should not have any pity. […] For example, when one of your employees is not productive or too slow or makes too many mistakes. We have experienced all of that. But maybe this person is a good person and you can have fun partying with him. But you should separate these things. You have to say: ‘You need to leave’. […] You need to fire people if they are not good (for your business). […] This is very difficult if employees are your relatives or friends. […] We have this sense of responsibility and solidarity towards our relatives. And this is then ‘broken’, so to say. (Int. 60, W, car tyre retail, male, 45)

188

6 Mixed market businesses Int. 59: It was difficult to work with relatives because they didn’t do their work properly. They feel that they have an advantage (over other employers) and they don’t have the same sense of responsibility. […] In the beginning, I wanted to support my relatives but usually their performance didn’t meet my expectations. […] I tell you honestly, I have tried a couple of times. They felt offended and we had problems. And now I only hire people that I don’t know personally and there are no problems at all. They do what I tell them and they don’t contradict me. It should be that way. ES: And how did you find these employees you previously didn’t know? Int. 59. Through the employment agency. ES: So it was not through friends or acquaintances? Int. 59: No. It is something you should not do. I have had a bad experience with that. It can have an impact on your friendship. There can really be a lot of misunderstanding. People felt offended simply because they neglected their work duties. If you tell them this as their boss they feel offended. (Int. 59, W, fireplace and kitchen furniture retail, male, 33)

While hiring native employees in mixed market business is usually a strategic decision in order to gain access to German clients, employment of co-ethnic staff is often a combination of principled and instrumental motivation of ethnic solidarity (Portes & Sensenbrenner 1993). On the one hand, the self-employed in the mixed market feel that they provide support to their migrant community by hiring co-ethnics. On the other hand, however, they benefit from co-ethnic staff when dealing with co-ethnic clients, and they often perceive coethnic employees as ‘easier to handle’ than native employees, as

6.2 Use of social capital in mixed market businesses

189

for example demonstrated by the following respondent’s comment: About 50% of my clients are Russian-speaking. At the moment we have three employees who speak Russian but their German is very weak. We generally prefer to hire co-ethnics. […] First, we do it to help them. And second, they are easier to handle. […] It is a bit difficult with natives. Whenever there is something they don’t agree with, they directly threaten you with the law code. And then we don’t talk to each other. However, IT and admin tasks are done by natives in our company. We get on well but we don’t hire them permanently. […] Our Russian-speaking employees were sent to us by the employment agency to do an internship. […] They arrived in Germany relatively recently in late 1990s or early 2000s. And they didn’t speak German. I told them they should go to a German company or a company where German is spoken to learn the language. But they said: ‘Well, it is too late, we are not going to manage to learn the language anymore. We would like to work here’. And I hired them. (Int. 60, W, car tyre retail, male, 45) The ‘easier to handle’ attitude often arose from a perception that native employees show less respect to employers with a migration background. Providing disadvantaged co-ethnics with employment is perceived as a good action but at the same time it is associated with expectation of gratitude and willingness to compromise. Although most interviewed mixed market businesses focussed on co-ethnics and the host population as their target clientele group, several businesses in addition strategically targeted other large migrant groups or migrant populations in general. Being able to offer services to economically disadvantaged groups (as compared to the host population) was perceived as a competitive advantage of small businesses that are more flexible to react to specific market demands. One business, for example, offered a rental of equipment

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and work space for car owners who preferred to repair their cars themselves. This service was mostly used by the migrant population. Another business, a fitness studio, offered short-term contracts and hired staff of different nationalities to attract customers with different migration backgrounds. In the sense of strategic transculturalism (Pütz 2004), these businesses reflexively assess demands of different groups and strategically apply this understanding in the entrepreneurial context identifying economic opportunities, as for example in the case of an interviewed car repair business owner: I have played around a bit to gain double benefits. I hired one of us (FSU ethnic German), one Turkish guy, and one native German. The Turkish guy had his own clients. So my idea was this — there are many people who need to repair their cars but don’t speak proper German. Then they cannot explain what ‘hurts’ the car. And if they can do it in their own language, then that’s great. Then they will come back. And they will be happy to come back. That was my idea. Our main target group for the equipment rental was migrants. FSU ethnic Germans and other migrants. […] They prefer to do it themselves. That’s why we had a rental workshop. (Int. 53, W, car repair service, male, 38) Cooperation with other self-employed FSU migrants among mixed market businesses was usually based on instrumental motivation, for example mutual recommendation of not-competing but related businesses or ‘forwarding’ of work to other self-employed when there were no capacities to carry out this work in one’s own business. Sometimes cooperation with and support of other self-employed co-ethnics was a matter of limited principled motivation whereby self-employed individuals had to balance their economic self-interest with the group’s interests. As shown in the example below of a car tyre retailer who provides free professional consulta-

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tions to non-competing co-ethnic start-ups, limited principled motivation resulted from the general wish to provide help and advice to fellow co-ethnics because of their disadvantaged situation, but there is also a self-interest in not harming the owner’s business by supporting potential competitors: I am happy when they approach me and ask for a consultation. But I always tell them, it depends on the sector and the location of the start-up. If it is too close to my own business, I tell them that they should not be angry at me but I cannot help them […] But otherwise if they do it in a different sector, then I don’t mind. If people think that the cake is big enough for everyone, they will be disappointed. […] I also support companies in the same sector if they are located far enough from my own business. This is actually an advantage for me because we can then strategically cooperate. […] I don’t ask for any money for my consultations. I do it because I want to support our people, people from Russia who come here, so that they can turn their ideas into reality. If they go to someone else, they often do not receive any support. They are told: ‘This is not going to work’. Instead of motivation they receive bad advice. (Int. 60, W, car tyre retail, male, 45) Compared to businesses operating in the migrant market, mixed market business owners were more likely to be embedded in professional organisations, such as trade or professional associations. Also, business-related collaborations within and outside the migrant community were relatively common. Similarly to findings from the study conducted by Fernandez & Nichols (2002), business owners in the mixed market were usually able to preserve co-ethnic social ties while simultaneously reaching out to groups outside their migrant community. Several respondents regularly attended professional trade fairs that served them as a platform to meet potential

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cooperation partners outside the migrant community. Further, compared to respondents running a migrant market business, it was more common for mixed market business owners to have native Germans and other migrants in their private personal social circle. Some of these private contacts resulted from their business activities. In general, interviewed mixed market businesses strategically used their intra-community social capital and social ties outside FSU migrant community (mostly network of industry) for their businesses. Their business-related networks were characterised by a mixture of formal price-regulated arm’s-length business relationships and embedded ties involving trust and reciprocity. While formal relationships dominated with business-related ties outside the FSU migrant community, informal relations were more common with co-ethnics.

6.3 Moving from migrant market to mixed market Moving from the migrant market to a broader market is a common wish of many migrant businesses as the migrant market is often restricted with regard to business growth potential (Kloosterman 2010; Ram & Hillin 1994). Some entrepreneurs start their business in the migrant market either due to problematic access to native clients or as a trial to gain entrepreneurial experience before moving to a broader market. ‘Break out’ from the migrant economy can be seen as a business diversification strategy (Barrett et al. 2001; Kloosterman 2010). In total, eight interviewed businesses assigned to the mixed market in this study started their enterprises as migrant economy businesses. They reported about difficult access to German clientele in the early stages of their business development mainly due to perceived distrust and scepticism by native clients.

6.3 Moving from migrant market to mixed market

193

The following strategies of gaining access to German clientele were mentioned in the interviews:    

Hiring a German staff member Using existing work-related contacts in the native population for client acquisition Expanding business activities online Volunteering and sponsorship in local non-commercial organisations

Hiring a German staff member Involving a native person in the business as a staff member was a common strategy to attract non-co-ethnic clientele. Usually, native staff members were colleagues from previous jobs. Depending on the business, German staff members were either taking care of German clients and communication with host institutions, or they were hired for active acquisition of German clients, as was the case for a company distributing anti-virus software developed in Belarus: I involved a German guy (he was previously working in the same place as the respondent). He got interested. He was calling all the schools. And we started selling licences to schools. […] The German guy’s job was to call potential clients. Then we started working with small IT firms. […] We found three or four such firms and they were selling our software to all their clients, like law firms, medical practices, and so on. (Int. 29, D, anti-virus software trade, male, 46)

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Using existing work-related contacts in the native population for client acquisition Another common strategy to gain access to German clients among self-employed who had experience of working as employees in German companies was using work-related contacts for their business. In the above mentioned example of an anti-virus software distributor, the interviewed business owner was running his business while still being employed at a German company which started using the software he was selling and recommended it to other German companies they were working with. In another example, a respondent running a massage business was working part-time in a German nursing home for elderly people. She approached her employer to tell them about her massage business and they offered her services to their employees covering the cost for it: When I started working in the nursing home for the elderly, my boss offered to cover the cost for a certain amount of hours of massage for employees. Let’s say 20 minutes per employee. And my colleagues started coming. They gave me a special room for that. I was doing it outside my working hours. And the nursery home was paying for it, for our colleagues. (Int. 11, D, massage service, female, 56) The colleagues who were receiving regular massages from the respondent at work started recommending this service to their German friends which enabled the respondent’s ‘break out’ of the migrant market, as the vast majority of her previous clients were FSU migrants. Expanding business activities online Setting up a business website in German can be helpful to attract German clients. Two respondents that started their business in the

6.3 Moving from migrant market to mixed market

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migrant market were able to move to the mixed market after they added online sales offerings to their websites. One of them also started selling his products on eBay. The migration background of the business owner is less visible in online retail as compared to offline retail. Online retail was also perceived by respondents as a possibility to enlarge their client base and get access to German clients without the need to activate their social capital for the purpose of client acquisition. Expanding business activities online is another opportunity to extend economic activities from the local market to a geographically broader market. Geographic expansion of business activities can be seen as a further ‘break out’ strategy of market broadening (Jones et al. 2000). Volunteering and sponsorship in local non-commercial organisations Several respondents mentioned participation in local social events and sponsorship of local sports clubs as a trigger for attracting German clients. According to the respondents, this strategy is based on creating trust and getting to know the locals. The two respondents who were involved in sponsorship of local sport clubs reported that this strategy has been the most effective for their business to get access to German clients by increasing attention among locals, gaining their trust, and improving their business reputation, as explained in the following excerpts: Getting the natives’ trust was the biggest challenge to overcome for us. As of today, we have a lot of (German) clients who come to us and they accept us the way we are. They still say ‘Russians’, but I can deal with that. This is not a problem for me. But generally they trust us and to gain this trust was the most difficult task for us. […] It took us almost five years to get there. […] They were not coming to us just because we’re Russians. For them this means, what they do cannot be honest and

196

6 Mixed market businesses they are going to lie to you anyways. To get rid of this reputation was extremely difficult. […] Our way to approach natives was via sport clubs. […] They meet there to watch competitions and to celebrate. Germans like partying. And they have barbeque and so on. And they talk (at such events). […] We went there as sponsors. These clubs always need money. And they don’t care where you come from as long as they get money. And it went fast. After we approached two clubs, other clubs started approaching us themselves. […] They have cups with our name everywhere. This was a really good decision. […] We don’t give a lot of money but even this had a big impact on us. We could not have done a better advertising nowadays. (Int. 60, W, car tyre retail, male, 45) In the beginning, I paid a lot of money for adverts. But it didn’t pay off at all. Absolutely no point. I’d rather invest in supporting a local football team. They are mostly kids from poor families. I support them so that they can buy sports clothes and afford going to training. […] Buying a couple of balls doesn’t cost much and pays off much better. They go there with their grandparents. And our company’s name is written there. I realised that I started getting customers because their children go there (to the sport club). We are treated in a different way by locals now. (Int. 16, D, car repair business, male, 42)

Sponsorship of local non-commercial organisations and participation in local volunteering events is seen as an opportunity to get in touch with the local community and establish social contacts outside the migrant community that can be beneficial for business development.

6.4 Moving from mainstream market to mixed market

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6.4 Moving from mainstream market to mixed market Adaptation of migrant business to mainstream market is often treated as ultimate ‘break out’ strategy in migrant entrepreneurship studies (e.g. Jones et al. 2000; Waldinger et al. 1990). High competition in the mainstream market can, however, restrict business success of migrant businesses as they compete directly with native entrepreneurs (Morakvasic 1999). Shifting to the mixed market by simultaneously turning to co-ethnic clients can provide migrant businesses with a competitive advantage as compared to the businesses run by natives (Engelen 2001). Three interviewed self-employed operating in mixed market started their business in the mainstream market. These respondents arrived in Germany in the 1980s and had worked for German companies before starting their own business. They were able to start a business directly in the mainstream economy because of their previous work experience and because they could rely on an established network of industry that included native professionals. At a later time point they identified additional economic gains of offering their services to co-ethnics and gradually moved to the mixed market. One respondent started his business as print designer after the German company in Düsseldorf where he had worked for several years as an illustrator and print designer had closed. When he started his business, he could use contacts to attract clients, who were mostly Germans, from his previous job. In the 1990s, when the mass migration from the former Soviet Union started, he volunteered for a migrant organisation supporting integration of FSU ethnic Germans. He was producing booklets for this organisation and realised that there was a demand for print materials in Russian. He realised that this niche was free and there were no competitors. At the same time, the competition in this sector in the mainstream economy was very

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high. The respondent realised that his migration background could be used as a competitive advantage. As part of his business diversification strategy, the respondent decided to specialise in producing print materials in two languages (German and Russian). The strategic move to the mixed market was fostered by his volunteering activities in the migrant community. The respondent is a co-founder of a migrant organisation supporting self-employment of FSU migrants which, among other activities, organises information exchange events between migrant firms and local companies run by natives as well as information events involving German institutions. He was also producing a print version of the ‘yellow pages’ of Russian-speaking businesses in his region that was distributed free of charge in Russian-speaking shops and organisations. Through this volunteering activity he has many contacts with self-employed coethnics that regularly hire his company to produce print materials for them. At the same time, the respondent decided not to move his business completely to the migrant market to minimise risks associated with focusing the business too much in one direction as he expects the demand from the migrant community to decline in the near future. Further, his business is a family business, and his son plans to take it over after his retirement, but his son’s knowledge of Russian is not advanced enough to provide services in Russian. The second respondent who moved from the mainstream market to mixed market had a plastering business. He started his business working for German clients to whom he was referred by a German plaster supplier. At some point, co-ethnics started approaching him. The respondent realised that there were many FSU families in the region at the time who started building their own houses. He did not plan his business as a mixed market business, but he responded to a specific temporary demand. Due to a relatively high proportion of FSU families in the Waldbröl region, the mixed market situation

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199

emerged without particular planning. The respondent could use contact with co-ethnics from his personal social circle for co-ethnic client acquisition. In the third case, the respondent took over an existing pharmacy from German owners after their retirement in 1989. At that time the migration from the former Soviet Union had just started and the pharmacy had mostly German customers. In the early 1990s, the pharmacy started getting occasionally clients from the former Soviet Union who realised that the pharmacy had a Russian-speaking owner. As pharmacies with Russian-speaking staff were relatively rare at the time, the information about this particular pharmacy was widely shared in the FSU migrant community and the pharmacy started getting Russian-speaking clients from different areas of Düsseldorf. The respondent, guided by principled and instrumental motivation of ethnic solidarity, decided to strategically respond to this demand by hiring additional Russian-speaking staff. On the one hand, she felt that her business could help her co-ethnics with language difficulties: ‘Many people came who did not speak German. […] I felt pity for them. They were so lost’ (Int. 41, D, pharmacy, female, 63). On the other hand, the respondent realised that there were no co-ethnic competitors in this sector and that targeting Russian-speaking clients would increase her business profits. She regularly advertises her pharmacy in local and regional Russian-language migrant newspapers and magazines. Because of the pharmacy’s location near the central train station the pharmacy is easy reachable for Russian-speaking clients from different parts of Düsseldorf and nearby municipalities. At the same time, because of its location, it is also popular among German and other local clients. The pharmacy has several native staff members alongside Russianspeaking staff. The move to the mixed market was associated with partial loss of existing German clients who felt uncomfortable because of the presence of Russian-speaking clients:

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6 Mixed market businesses We are a mix. A good mix of 50-50. There is a residential street nearby and people who live there are our clients. We even have German clients who come to us from other neighbourhoods. They probably just got used to us. […] But there were also local customers who stopped coming to us because there were suddenly too many Russians. […] It was a shock for them and they left. But this is not tragic. There is another pharmacy around the corner where they get medical help. (Int. 41, D, pharmacy, female, 63)

In all three examples of the switch from the mainstream market to mixed market, the business owners were combining different ethnic and non-ethnic resources to exploit promising business opportunities and benefited from their social ties to the host population through their professional networks and social ties to co-ethnics from their personal social networks.

6.5 Example of business network in mixed market Figure 8 illustrates the business network of a musician who performs and teaches music in the mixed market. She moved with her parents to Düsseldorf from Ukraine as FSU Jewish migrant at the age of 16 and became self-employed after finishing her studies. At interview time, she was 30 years old and has been self-employed for six years. Following a strategy of diversification in the same sector the respondent offers a wide spectrum of services targeting at different market segments of the music industry. Initially she started her business in the migrant market but move it gradually to the mixed market. Her business network is a diverse network consisting of several clusters that are generally not interconnected with each other.

6.5 Example of business network in mixed market

201

Figure 8: Business network map of a self-employed musician in mixed market

Note: Circles indicate individuals, squares indicate groups of people or ogranisations.

The respondent invests time and effort in relationship building and combines different contacting paths to establish business-related relationships. Her business network is a combination of weak and strong ties. Although her father and boyfriend (both musicians) are regularly involved in her business activities, overall preference in her network is given to professional weak ties. There is a mixture of price-regulated and informal reciprocal business relationships

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whereby formal price-regulated relationships mostly dominate when she works with native clients while embedded ties involving reciprocity dominate when she works with FSU clients. Especially at the beginning of her career as a musician, there was sometimes no direct monetary incentive for her work and the work was done to support her co-ethnics in anticipation that they will ‘pay back’ with a favour at a later time point or an opportunity to make herself known in the FSU migrant community. Apart from social contacts that are necessary for her business, she also gets involved in voluntary social activities that are not initially formed for business purposes but have a potential of adding value to her business-related activities (e.g. by getting involved in local social projects and voluntary work of migrant organisations). In the sense of strategic transculturalism (Pütz 2004), the respondent actively builds relations in different social and cultural circles that can be profitable for her business. When the respondent was asked about actors that are important for her business as part of her network map drawing exercise, she mentioned different channels of social capital that she uses in her business: Look, you made me think about how it all functions. I simply have never thought about this before. First, I have all these ties from there (Ukraine). Family ties and my experience there. And these people moved to Germany. Some because of work, some to study, some migrated here. And I cooperate with them. […] Second, I am a very sociable person. I am an outgoing, interested, and open-minded person and I communicate not only with musicians. When I participate in social projects people know that I am a musician and then if they organise events they invite me (as a singer) or their children become my students or they take vocal classes from me themselves. Third, I offer a wide spectrum of

6.5 Example of business network in mixed market

203

genres and this helps my business growth. I don’t specialise in just one genre like opera or pop. And it is also helpful that I have contacts not only with Russian-speaking people. In the beginning, I only had contacts with Russian-speaking people because of language problems. But then I learned German and gained self-confidence, and I am happy that I didn’t focus only on Russian-speaking clients. (Int. 19, D, musician, female, 30) The respondent, who is an active member of the local Jewish community, is specialised among other music styles in Jewish music and vocals. Her connections in the Jewish community in Germany (network of destination) provide her with regular performances in the Jewish FSU community (e.g. religious holidays, festivals, weddings). Further, the respondent regularly gets involved in sporadic transnational business-related activities. She is coming from a family of musicians and can benefit from cooperation with musicians in Ukraine (network of origin). Her connections in the Jewish community provide her with occasional performances in Israel and the USA (diasporic nodes). In addition, the respondent studied opera vocal in Germany and Italy and can use her professional network (network of industry) for occasional performances in European countries. Thus, she is strategically uses her social capital from different networks for her business. Apart from performances, the respondent is also involved in music teaching. She teaches music classes at a German music school between one and two days per week as a part-time employee. Although she would prefer full-time self-employment over a combination of part-time employment and freelancing, she decided to maintain part-time employment as it guarantees her a fixed monthly income and health insurance partly covered by the employer. She also sees her teaching activities at a German school as an investment in building professional ties to the host population that can be

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beneficial for future development of her business. Further, she receives regular work contracts as a self-employed musician from a German operetta theatre. The respondent flexibly uses weak ties in Germany and other countries for her business and tries to disseminate information about potential business opportunities within her network. At the same time, she intentionally avoids brokerage between different parts of her business network to be less dependent on interconnections and relationships between her business partners.

6.6 Conclusions In line with recent studies on migrant entrepreneurship (e.g. Leicht & Werner 2013; Rusinovic 2006) this chapter shows that migrant business can benefit from simultaneously targeting co-ethnic and mainstream clientele and using both ethnic and non-ethnic resources. Interviewed businesses in the mixed market often applied strategic transculturalism (Pütz 2004) by flexibly operating between different cultural groups in order to gain additional economic opportunities. Most of the interviewed businesses in the mixed market started their enterprise in the migrant market mainly due to problematic access to general population clientele and relevant business-related networks outside FSU migrant community. Targeting co-ethnic clientele in the early stage of business development was perceived as satisfactory alternative in the sense of bounded rationality and optimisation under constrains (Tolciu 2011). Over time these businesses applied various strategies to move to a broader market to enable economic growth of their business. While strong ties enabled

6.6 Conclusions

205

practical support at the start-up phase for most interviewed businesses in the mixed market and intra-community weak ties were beneficial for their business activities targeting at co-ethnic clientele, weak ties outside FSU migrant community (and especially those in the network of industry) were particularly important for the ‘break out’ from the migrant market. Hiring a German staff member, mostly through ‘small world recruitment’ from network of industry, was a common procedure to attract German clients. Further, the interviewed self-employed in the mixed market used existing work-related contacts with the native population for client acquisition. Expanding business activities online was another strategy to enlarge market extent geographically and in terms of client composition. Some respondents strategically applied volunteering and sponsorship in local non-commercial organisations to build trust relationships with locals and expand their clientele circles. In addition, joining professional associations was associated with the broadening of the market reach. Although it is more common for migrant businesses to move from the migrant market to mixed market, several interviewed businesses that started their business activities in the mainstream market identified additional potential economic gains of simultaneous targeting co-ethnic clientele and moved to the mixed market. While professional weak ties with natives facilitated access to German clients, weak ties from the personal social circle in the FSU Russian-speaking community were used to attract co-ethnic clients when moving from the mainstream to mixed market.

7 Mainstream market businesses According to the convergence hypothesis, over time both migrant and native self-employed become increasingly similar with regard to their profiles, not only in terms of their self-employment rate but also in terms of their range of occupations and sectors (Desiderio & Salt 2010). ‘Break out’ to the mainstream market leading to economic assimilation is often perceived as the ultimate goal of economic incorporation of migrant businesses in migrant entrepreneurship studies (e.g. Jones et al. 2000; Waldinger et al. 1990). The mainstream market in this study is defined as a market with predominantly mainstream clientele (general population) with no specific function or targeting co-ethnic clients. On the market continuum it represents businesses that are mostly or entirely embedded in the mainstream economy (Figure 9). Ndofor & Priem (2011) describe operating in the mainstream market in the migrant entrepreneurship context as a ‘dominant strategy’ aimed at serving the locally dominant market with a ‘mainstream product that is produced by mainstream labour from materials provided by mainstream suppliers’ (Ndofor & Priem 2011). They further state that the above is the pure form of a dominant strategy, but migrant businesses are not constrained only to pure forms, and mixed forms are ‘based on [the] degree to which each venture serves and sources from the ethnic community’ (Ndofor & Priem 2011). Serving mainstream market with an ‘ethnic’ product (e.g. restaurants) or employing ‘ethnic’ labour are common examples of mixed forms of venture strategies.

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 E. Sommer, Social Capital as a Resource for Migrant Entrepreneurship, https://doi.org/10.1007/978-3-658-29141-9_7

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Figure 9: Market continuum – mainstream market

Source: Own figure.

While there are numerous studies of migrant entrepreneurship with a focus on migrant businesses operating in the ethnic economy or low entry barrier businesses in mainstream economy with a high proportion of self-employed migrants, studies dealing with highskilled migrant businesses operating in the mainstream market are still relatively rare, but their number has been growing recently (e.g. Brzozowski et al. 2014; Leung 2001; Saxenian 1999, 2002). This is partly due to the respondent selection in non-probability samples as migrant businesses operating in the mainstream economy are difficult for outsiders to identify (Rath 2002). This chapter demonstrates what type of social capital is used by interviewed businesses operating in the mainstream market. It starts with a brief overview of interviewed businesses active in the mainstream market. The chapter illustrates that the access and use of

7.1 Overview of interviewed mainstream market businesses

209

social capital by businesses operating in the mainstream market differ between businesses in low entry barrier sectors as compared to businesses providing knowledge-intensive services. The main characteristics of social capital used by self-employed in these two segments of mainstream market are outlined in the second and third sections of the chapter. Two illustrative examples of business network maps in the mainstream market and a brief summary of findings conclude the chapter.

7.1 Overview of interviewed mainstream market businesses Mainstream businesses run by migrants are difficult to identify for research as they usually do not advertise their businesses through migrant community channels and use a neutral naming for their businesses that do not indicate migration background of the owner. In total 20 of the interviewed businesses were assigned to the mainstream market strategy. They are presented in Table 8 and were mostly found through the author’s personal network in the Russianspeaking community. Although usually studies on migrant entrepreneurship report about a gradual shift of business from the ethnic economy to mainstream economy, all interviewed businesses in the mainstream migrant, except one, in this study started their business directly in the mainstream economy. The youngest respondent in the mainstream market sample was 24 years old and the oldest 58 years old. Compared to interviewed businesses in the migrant and mixed markets, respondents running a business in the mainstream market were younger with 5 respondents out of 20 being in their 20s (see Table 8 & Table 9). Most of them received their post-school education in Germany.

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Table 8: Overview of interviewed mainstream market businesses Int BusiNr ness

Status

Required skill level

Migrant group*

CoGenAge** ownerder ship

Formal staff *** Yes Staff in Russia

IT 1 services IT 2 services Slot machine 3 arcade Sports therapy, 4 training Sports clothes design and pro7 duction

Established Startup

High

EG

F

38 No

High

JM

M

24 No

Given up

Low/ middle

EG

M

47 No

No Yes Germans

Startup

High

EG

M

30 No

No

Startup

High

OM

M

Yes FSU 29 friend

IT 9 services

Given up

High

JM

M

Hairdressing 14 salon

Established

Low/ middle

EG

F

Transportation Start15 services up

Low/ middle

EG

M

Construction Estab22 company lished

Low/ middle

OM

M

Established

Low/ middle

EG

M

25 Pizzeria

No Yes Ger43 No mans Yes Yes EthniFamily cally 41 member mixed Yes FSU mi30 No grants Yes Ethnically 55 No mixed Yes Ethnically 34 No mixed

7.1 Overview of interviewed mainstream market businesses

Int BusiNr ness

Required Status skill level

Migrant group*

CoGenAge** ownerder ship

211

Formal staff ***

Shoe repair and key 31 service

Established

Low/ middle

Care 35 service

Startup

Low/ middle

JM

M

Yes Family 34 member Yes German former col43 league

Startup

Low/ middle

JM

M

27 No

Yes Germans Yes FSU migrants

Established

Low/ middle

EG

F

31 No

No

Startup

High

OM

F

No

Clothes 42 shop

Startup

Low/ middle

OM

F

24 No Yes FSU 43 friend

Web 45 design

Startup

High

JM

M

Media 48 design

Startup

High

JM

M

Electroplating 37 business Event manage38 ment Translation 40 service

Transportation Estab57 services lished

JM

M

35 No Yes FSU 29 friends

Yes FSU migrants

No Yes Ethnically mixed No Yes FSU migrants

Yes FSU EG M 58 migrant Yes FSU Yes former EthniCare Start- Low/ colcally 58 service up middle EG F 47 league mixed Note: *EG – FSU ethnic Germans, JM – FSU Jewish migrants, OM – other FSU migrants; **Respondent’s age at interview; ***Formal staff including freelancers. Low/ middle

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Table 9: Summarised overview of interviewed mainstream market businesses

Ethnic Germans

Jewish migrants

Other FSU migrants

Total

Low/middle-skilled businesses

7

3

2

12

High-skilled businesses

2

4

2

8

Start-up

3

5

3

11

Established (>5 years)

5

1

1

7

Given up

1

1

0

2

Female

4

0

2

6

Male

5

7

2

14

50 years old

1

0

1

2

Total

9

7

4

20

Required skill level

Business status

Respondent’s gender

Respondent’s age

Several studies have demonstrated that the importance of co-ethnic clientele declines for second-generation migrants (e.g. Disederio & Salt 2010; Rusinovic 2006; Schmiz 2011). Compared to interviewed businesses in the migrant market, interviewed businesses in the mainstream market were unlikely to start their self-employment out of unemployment. Pull factors and intrinsic motives (e.g. better earning opportunities and flexibility) were common motivation to start up a business.

7.1 Overview of interviewed mainstream market businesses

213

Mainstream market strategy was common to similar extent among interviewed FSU ethnic Germans and FSU Jewish migrants as well as in the low/middle-skilled and high-skilled sector (Table 9). However, it was not possible to interview any high-skilled mainstream market business in Waldbröl. Apart from the difficulty to identify mainstream market migrant businesses for research, it is common for high-skilled migrants to leave rural area and to start their businesses in urban areas. In general, the interviewed businesses operating in the mainstream market can be divided in two categories: businesses in low entry barrier sectors mainly serving the local general population (e.g. shoe repair shop, slot machine arcade, retail) and high-skilled businesses in knowledge-intensive sectors (e.g. IT services, web design). While the businesses in the first category were usually run by migrants who received their education in their country of origin and were established businesses, the businesses in the second category were mostly operated by migrants who studied in Germany and were start-ups. Also, forms of so-called ‘new self-employment’ (Schulze Buschoff 2007) and freelancing were more frequent in mainstream market than in other market segments. Some of the respondents were self-employed because it is a common form of employment in their sector. In the sense of the ‘mixed embeddedness’ model (Kloosterman & Rath 2001), current politico-institutional contexts and welfare regimes contributing to new forms of self-employment have an impact on self-employment decisions of the migrant population. Contrary to traditional understanding of entrepreneurship that aims at business growth and innovation (e.g. Schumpeter 1934), ‘new self-employment’ is a relatively recent phenomenon where freelancing and temporary contracting with the goal of ‘creating’ a job for yourself rather than building up a business in the traditional sense. ‘New self-employment’ is a frequent form of employment in particular sectors, such as IT, consulting, and creative sectors, but it is often associated with precarious employment (Schulze

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Buschoff 2007). Thus, self-employment is not always a voluntary choice but a necessity in some economic sectors whereby freelancing staff do not enjoy the same social security rights as employees (e.g. they are not entitled to health and old age insurance contribution provided by the employer or permanent contracts). There were more male respondents operating in the mainstream market than females (Table 9). Interestingly, compared to male respondents, females self-employed in the mainstream market were more likely to have worked in the same sector as employees before starting their own businesses. Three out of six interviewed female self-employed in the mainstream market took over existing businesses from former German employers after their retirement. Because of their previous employment in the same sector, female respondents in the mainstream market were usually involved in professional associations and already had an established professional network outside the FSU migrant community when they started their self-employment. They mostly preferred formal business relationships and used their networks of industry as the main resource of social capital. Further, their previous professional experience and professional skills replaced the need to invest in informal social capital or use personal social networks for their businesses. Interviewed females in the mainstream market usually relied on price-regulated business-related relationships and ethnic background of actors in their business networks was less relevant for them than their professional qualifications.

7.2 Mainstream businesses in low entry barrier sectors Migrant entrepreneurship oriented towards general population clientele in economic sectors with low entry barriers is common in Western Europe and the USA (Bonacich 1973; Rath 2001; Pütz

7.2 Mainstream businesses in low entry barrier sectors

215

2004). These are mostly labour intense sectors in stagnating or shrinking markets with a low entrance barrier and high competition within the niches that are left by native entrepreneurs due to low economic profits that can be gained from them (Model 1997; Rath 2001; Waldinger 1996). On the one hand, markets with lower entrance barriers facilitate business start-ups among migrants with limited resources. They usually do not require such resources as advanced language skills, social ties in the host society, or high levels of human and financial capital. The institutional barriers in these sectors are relatively low as well, and monetary profits can be gained relatively quickly through intense labour. On the other hand, these sectors attract a large number on migrant entrepreneurs and the saturation point is reached relatively quickly resulting in severe competition and price dumping (Kloosterman 2010; Ram et al. 2002). Eight out of 12 interviewed mainstream businesses in the low/middle-skilled sector can be assigned to businesses in the low entry barrier sector. These types of businesses, such as a shoe repair shop, clothes retail shop, online retail or local pizza franchising restaurant, mostly serve the local general population. In addition, one construction business and two transportation services companies operated in a geographically broader market. All of these businesses reported about high competition in their sector. They were mostly competing with other local businesses and bigger companies, but for transportation and construction sectors, increasing competition from businesses run by EU-migrants from East-European countries like Poland and Baltic countries were mentioned as well. Although interviewed low barrier businesses served the general population and often hired ethnically mixed staff, social embeddedness in the FSU migrant community was typical for these businesses. Similar to the interviewed businesses in the migrant market,

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‘sole proprietorship’, ‘family partnership’, and ‘partnership with kin or friends’ (Waldinger et al. 1990) forms of ownership dominated among interviewed mainstream market businesses with low entry barriers. The requirements of these forms of ownership are either to fulfil as compared to ‘ownership with others’ (mainly meaning strategic ownership with professionals), and close relationship between business owners is seen as a strategy to reduce risk of opportunism (Ahuja 2000). However, three respondents that started their businesses with a friend reported about a negative experience that was counterproductive for business growth and decided to continue their ventures without a co-owner. Despite the fact that several businesses hired ethnically mixed staff, preference was given to co-ethnic staff and recruitment through personal channels rather than through formal channels in mainstream market sectors with low barriers. Non-co-ethnic staff were hired mainly out of necessity, for example, in cases of business take over or by businesses that required a relatively large amount of staff (e.g. in the pizza delivery or construction business) that could not be covered through recruitment from the FSU community only. There were different reasons of hiring co-ethnic staff which were mainly a combination of principled and instrumental motivation of ethnic solidarity. One respondent in the construction business, for example, mentioned that he hires Armenians (not only from FSU countries) when he is asked by his friends from the Armenian diaspora to support them in the early stages of their arrival in Germany. At the same time, he hires people on recommendation from other ethnic groups through his own personal contacts in the Russian-speaking community because of transitive trust and responsibility. He previously had a negative experience with hiring staff through an employment agency that did not stay long and did not seem to be interested in the job. He prefers to hire staff on recommendation from his personal social circle because he believes that individuals who know him personally would not recommend someone who is unreliable

7.2 Mainstream businesses in low entry barrier sectors

217

because this would damage their own reputations. Further, in his opinion, by hiring through his own channels he has more control over the hiring procedure and finds it more time effective: I mostly hire though acquaintances. Many people call me and recommend someone. And many companies work with me. They say: ‘I know someone’. Or I ask them: ‘Do you know anyone?’ This is simple. But if I call there (the employment agency) then there will be 100 people coming tomorrow. I had about five people coming every day from there. And if you reject then they call you asking why did you reject them, what did not you like about them, telling you that they will send someone else. This is annoying. (Int. 22, D, construction business, male, 55) Preference for co-ethnic staff and recruitment through personal channels was also explained by several respondents as a wish to work with people whose mentality they understand and because of the possibility to get to know them better before the recruitment, as for example mentioned in the following quote: I prefer them because before I hire them I chose them. I talk with them, meet them, see if I can trust them and if I can work with them. And with Germans… In my sector I cannot work with them closely. I can from time to time but not closely. […] I prefer to work with Russians because I can analyse them, I can get to know them better. (Int. 15, D, transportation services, male, 30) Despite the preference of co-ethnic staff, only few businesses had family members among their staff. Strong ties were, however, important for financial support in the start-up phase particularly for businesses that required financial investment in the beginning (e.g. for renting of the arcade slot machines, franchising fees, equipment, etc.).

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In terms of clientele, the preference was clearly given to the general population. Although private social networks of interviewed respondents running a business in the mainstream market mostly consisted of FSU migrants and they were socially integrated in the Russian-speaking migrant community, respondents expressed a desired distance from co-ethnic clientele and the association of being a migrant business. An interviewed owner of a hairdressing salon, for example, mentioned that when she gets occasional clients from her personal Russian-speaking social circle, she tries to give them appointments on different days so that her German clients do not feel uncomfortable if several clients start speaking Russian to each other and the salon gets a reputation of being a Russian business. Compared to mainstream businesses operating in knowledge-intensive sectors, businesses operating in low entry barrier sectors were rarely involved in professional associations. However, compared to migrant market businesses they had more business-related relationships outside the FSU migrant community. Apart from necessary formal ties (e.g. to suppliers or relevant institutions) both formal price-regulated as well as business-related reciprocal relationships within and outside FSU migrant communities were common for these businesses. For example, the following respondent, a construction business owner, describes a reciprocal strategy where he occasionally provides services to German architects that are not particularly profitable for his business in the expectation that these ‘favours’ will minimise the risk of possible exclusion from competition for future larger orders, as he sees the architects as gatekeepers in his sector: I normally do not take small jobs. But sometimes, if these are acquaintances, for example architects, and ask me to renovate a small flat […] I never decline even if this is little money for me. If you decline a few times because you are only interested in big money you will

7.2 Mainstream businesses in low entry barrier sectors

219

be left out of this system. (Int. 22, D, construction business, male, 55) Business-related relationships between mainstream market and migrant market businesses were relatively uncommon. Generally, links to other FSU self-employed migrants are strategically used in a reciprocal way and are based on instrumental motivation of ethnic solidarity, as for example demonstrated in the following quote: If there is a real problem and I need help, I first try to sort it out with my staff or through my Russian-speaking contacts. But I pay for that. I tell people who have their own companies: ‘Look I don’t want it for free but I also don’t want to pay a lot for it. I want you to do it for me as a friend in a proper way’. And many people who know me do it for me because I tell them: ‘Do it in a way that is convenient for you because I will come back to you with more orders’. […] Once, for example, I had a plumbing emergency on New Year’s Eve. I called my friend and he told me: ‘I cannot come today but I will come tomorrow’. He came at 8 am on the 1st of January. He repaired it and went home. I gave him a couple of pizzas. It would have cost the company probably about 300-400 Euro. (Int. 25, D, pizzeria owner, a, male, 34) Transnational social capital in the country of origin, on the other hand, is hardly relevant for mainstream businesses operating in low entry barrier sectors. Transnational ties in third countries are relevant for some businesses (e.g. transportation services or clothing imports) and are mainly acquired through relevant professional online portals or via diasporic nodes after migration.

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7 Mainstream market businesses

7.3 Mainstream businesses in knowledge-intensive sectors Interviewed self-employed running a business in high-skilled knowledge-intense sectors of the mainstream market were mainly relatively young migrants who studied in Germany and lived in Düsseldorf. Some of them became self-employed because freelancing and forms of ‘new self-employment’ (Schulze Buschoff 2007) were common ways of employment in their sector and there was a lack of offers for long-term full-time employment. This is especially common for creative industries (e.g. designers, artists) and some knowledge-intensive sectors (e.g. translation, IT). Among the pull factors motivating them to become self-employed, respondents frequently mentioned flexibility and existence of a potential customer base before they began self-employment. It was common for respondents who studied in Germany to have had working experience in the mainstream market during their studies. They could use their network of industry to get access to first clients and self-employment was associated with better earning opportunities for some respondents, as for example illustrated in the following quote: When I was working, I had many requests from people I knew and others. I was asked if I could do some work for them. Mainly websites and so on. And if I work as an employee I cannot do it because of the tax issues and so on. And that’s why I could only take small orders. And that’s why I did it (became self-employed). Because I already had a small customer base and I had opportunities. (Int. 2, D, IT services, male, 24) It was also common among this type of business to receive support (mainly information exchange and recommendation to clients) from their former employer if they were not in direct competition. As freelancing is a common type of self-employment in this particular segment of the mainstream market, interviewed respondents assigned

7.3 Mainstream businesses in knowledge-intensive sectors

221

to this market segment usually did not have any employees or business co-owners. Business-related ties were often a mixture of priceregulated formal relationships and weak ties (mostly professional) involving trust and reciprocity outside the FSU migrant community. Preference was usually given to formal specialised business relationships whereby respondents’ knowledge, skills and work experience served as a guarantee of reliability and competence for their business partners and replaced the need for informal relationships. Compared to other types of businesses in this study, these groups had more heterogeneous professional networks and used their network of industry to get access to relevant gatekeepers and institutions. Düsseldorf was perceived as a place that provides access to various professional networks and diverse client groups for businesses in knowledge-intensive and creative services. Weak ties to co-ethnics, on the other hand, were rarely relevant for these types of businesses. However, several respondents had Russian-speaking strong ties (close friends and family members) involved in their entrepreneurial network. While strong ties were associated with practical problem solving, weak ties were a valuable resource for generation of new business ideas. With regard to clientele, preference was clearly given to general population customers. Several respondents expressed a desired distance to co-ethnic clientele and migrant economy, for example because of perceived expected ethnic solidarity resulting in the expectation of lower prices, as mentioned in the following quote: Russian-speaking clients usually assume that everything will be very cheap. But if it is cheap then you need to cut back on other things. And then there are problems like: ‘Why is it this way and not that way?’ Well, if you require the cheapest, then this is what you get. […] Maybe they want to save money or maybe they think: ‘If

222

7 Mainstream market businesses this is guy is Russian, he will ask for less money than a German’. (Int. 2, D, IT services, male, 24)

Some respondents strategically implemented practices to avoid association of their business with the Russian-speaking migrant economy as, for example, was mentioned by a respondent whose business designs and produces functional sports clothes: It was indeed important for us to go on the distance with Russian-speaking clientele and Russian-speaking community. Ideally, we wanted to make the migration background of the business invisible. […] We do everything in German. We just want to get away from this cliché that Russians have started something again. […] That’s why all the texts on our website are written by a German professional journalist. […] The only way you can find out that we are Russians is on the phone (because of the accent) or by (looking at) my family name. (Int. 7, D, design and production of functional sports clothes, male, 29) Despite the desired distance from co-ethnic clientele and FSU migrant market, respondents in knowledge-intensive sectors regardless of their age still strongly identified with the Russian-speaking migrant community and had mostly Russian-speaking friends. Characteristic for this group of businesses is use of paid support from professional business consultants (e.g. for the development of the business plan) as well as knowledge of available institutional support (e.g. state funding for start-ups). As noted by Smallbone et al. (2005: 237): Institutional- or intermediary-based trust is prevalent when individuals have confidence in the economic, political and social institutions that they have to deal with.

7.3 Mainstream businesses in knowledge-intensive sectors

223

These formal institutions refer to issues of contract enforcement, standardisation of measurements and quality, and provision of information, as well as other areas of the economic system. […] However, every enterprise relies on both personalised and institutionalised trust, with one able to replace the other in most circumstances. Personalised trust involves transaction costs to initiate it in terms of building up a relationship. Institutionalised trust incurs transaction costs in terms of ongoing regulation and legal enforcement. Respondents operating in knowledge-intensive sectors of the mainstream market often combined personalised and institutionalised trust. Trust in host society institutions was higher in this group of entrepreneurs as compared to groups operating in other market segments. The access to institutional support was easier for this group and alongside professional networks and skills there was less need to get business-related support from the FSU migrant community and rely on informal and personal networks. Interviewed businesses operating in knowledge-intensive sectors of the mainstream market were occasionally getting involved in complementary transnational entrepreneurial activities. However, most of these businesses did not get involved in transnational entrepreneurial activities in the country of respondent’s origin but in other, mostly EU, countries. The respondents in this group were usually using their ties from professional networks (e.g. ties to former fellow students or contacts they acquired during their internships abroad) to get access to transnational business-related social capital.

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7 Mainstream market businesses

7.4 Examples of business networks in mainstream market The following two examples of self-employed in the mainstream market in Düsseldorf (an IT company and a business specialised in sports therapy, training, and consulting) are illustrated using the network maps that were collected during the interview. IT company – example of moving from migrant market to mainstream market The following example illustrates an IT company that started their business operating in the migrant market but moved to the mainstream market over time. The respondent was 23 years old when she migrated from Russia to Germany as an FSU ethnic German with her husband in 1996. She studied economics in Russia and had worked for several years in a company specialised in export to Russia run by a FSU migrant in Düsseldorf before becoming selfemployed. She decided to start her own business because of limited development opportunities in her previous job. Her husband is a programmer working for a large multinational IT company as an employee. He is key person in the respondent’s business network (strong, multiplex tie, Figure 10). Parallel to his work as an employee in the IT sector in order to support the family with a fixed regular income, he is involved in all areas of his wife’s business as an unpaid supporting family member. Together they realised that there was a demand for software development for multi-language companies specialised in export. There were no competitors at that time that would provide such a service to Russian-German companies. The previous employer of the respondent (Company A in Figure 10) became her first major client and was forwarded to another similar business run by a FSU migrant (Company B in Figure 10). In the first six years her business was entirely embedded in the Russian-speaking migrant market

7.4 Examples of business networks in mainstream market

225

with two major permanent clients and a number of smaller occasional FSU clients (see Figure 10). Figure 10: Business network of an IT company – start-up phase, migrant market

Note: Circles indicate individuals, squares indicate groups of people or organisations.

In the start-up phase the company was mainly developing customised enterprise resource planning (ERP) software for companies specialised in export to FSU countries. The decision to focus on an ‘ethnic niche’ rather than the mainstream market was mainly because of the restricted access to the German market. According to

226

7 Mainstream market businesses

the respondent, she was not able to get any German companies as her clients in the early phase of her business development because she could not provide any references or entrepreneurial experience in Germany and had no business contacts in the German IT sector. In the sense of bounded rationality, she decided to activate her resources in the FSU migrant community and get entrepreneurial experience in the IT field in the migrant market before moving to the broader mainstream market. The respondent is involved in daily transnational entrepreneurial activities by outsourcing programming tasks to programmers in Russia. This outsourcing is a competitive advantage of her business as she can offer high-quality IT services at lower prices than her German competitors because of cheaper programming costs in Russia. Progress in digital communication technologies enables daily transnational contacts without a physical presence and there is no need to travel between two countries. They found the first programmer in Russia through their friend, also an IT specialist (network of industry, “Friend” in Figure 10 and Figure 11), whom they had already known prior to their migration to Germany and who also migrated to Germany from the same city. The first programmer suggested the second programmer to them. After six years operating in the migrant market, the respondent decided to change her business model as she was not satisfied with her main clients’ payment reliability and there were conflict situations. The respondent decided to try to enter the German market again as she wanted to move away from the migrant economy and to work with established companies. She adapted her product offer to the needs of the mainstream businesses and contacted a German company where she did an internship in the first year of her arrival to Germany offering them her services on a trial basis. This company (Company C in Figure 11) became the respondent’s first

7.4 Examples of business networks in mainstream market

227

German client and forwarded her to two other bigger German companies (Company D & Company E in Figure 11) who became her main clients. Having these three main clients and several smaller clients enabled the respondent to leave the ‘ethnic niche’ and enter a more profitable market. For some time she was operating in the mixed market, still having a substantial proportion of smaller FSU migrant companies among her clients. With growing experience of working with mainstream companies, the respondent started considering her co-ethnic clientele as very demanding in terms of the flexibility they required from her (e.g. calling her at late hours or placing orders on short-term notice). She also realised that she was not willing to provide services at lower costs to co-ethnic clients anymore, but she feared that if she refused she would not receive any reciprocal support from them when needed: It was difficult (to refuse), very difficult and I was very worried about it. […] I had this feeling — what if I need something in the future and there will be no one to help. (Int. 1, D, IT services, female, 38) Guided by instrumental motivation, the respondent found a way around this problem and started referring these clients to her colleagues who were less experienced and who offered their services at lower costs: Many people understand this in fact. I recommend them alternatives. I tell them: ‘You can contact these people, they do not have as much experience in that field as I do, but maybe they will agree to do it for you for this money. But not me’. (Int. 1, D, IT services, female, 38)

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7 Mainstream market businesses

Figure 11: Business network of an IT company – after 10 years, mainstream market

Note: Circles indicate individuals, squares indicate groups of people or organisations.

After about a year of operating in the mixed market, the respondent decided to go the distance with migrant market companies: We don’t work with Russian-speaking clients anymore because it is more interesting for us to work with established businesses. […] Because there you know for sure that you will be paid for your work as you don’t have any

7.4 Examples of business networks in mainstream market

229

concerns about the financial solvency of your client. […] And you do your work faster with them, which results in more money for you because you work faster as they know exactly what they want. (Int. 1, D, IT services, female, 38) At the time of the interview, she only had a few occasional FSU clients that were barely relevant for her business development but who she decided to keep because of their longstanding relationship, and she wanted to keep some contacts in the migrant and mixed markets in case her business experienced challenges in the mainstream market. After some time, the respondent was also not satisfied with the qualification level and reliability of her programmers in Russia and decided to replace them. As previous programmers were friends, they were covering each other in conflict situations with the respondent and were using the ‘two against one’ constellation in arguments. Apart from that, one of them (Programmer A in Figure 10) was a friend of the respondent’s friend (Friend in Figure 10) and she had a feeling sometimes that the programmer was not taking her seriously in her role as their head and also contacted their common friend in critical situations. To increase formalisation of the relationship with the programmers working for her in the sense of arm’slength business ties and to gain more autonomy, she decided to look for new, better-qualified programmers herself and not rely on referrals by friends or acquaintances. She advertised a job offer in a Russian online portal for freelancing IT specialists. Applicants had to submit an assessment and participate in a Skype job interview. She had never met her programmers in person. She was outsourcing programming work to Russia, as her costs reduction strategy was still essential for her business development at the time of the interview and she experienced no disadvantages caused by geographic distance.

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7 Mainstream market businesses

This example clearly shows the dynamic nature of migrant businesses. It is also an example of a migrant business focusing on the mainstream market in the host country by involving intensive transnational activities in the country of origin. While the transnational strategy remained similar over time (only the persons have changed), there are obvious differences in the structure of the two other sectors in the two network maps at different time points of business development. Whereas the ‘Germany – Others’ sector (native Germans and non-FSU migrants in Germany) was empty in the start-up phase, it became the main market in the more established phase. The ‘Germany – FSU migrants’ sector, at the same time, lost its market position and had only a few smaller occasional clients and strong multiplex business supporting ties that stayed over time. Further, the second network (Figure 11) is more formal compared to Figure 10 with most ties being ‘business only’ ties. However, her ‘business only’ relationship with Company C (previous internship employer) at the beginning of their cooperation had started evolving into a relationship that goes beyond business and involves private communication (e.g. family dinners) at the time of the interview.

Sports business – example of starting a business directly in mainstream market The following example illustrates a business network of a respondent who started his business directly in the mainstream market. The respondent arrived in Germany from Moscow as a FSU ethnic German at the age of 15 in 1996. He studied sports science at a German university. After his graduation, he became self-employed as a sports therapist and sports consulter because self-employment is a common way of employment in the sports sector. At the time of the interview his business was in the start-up phase and the respondent worked as a part-time personal fitness trainer in a fitness studio to

7.4 Examples of business networks in mainstream market

231

enable a fixed regular income. However, he was planning to move to self-employment completely at a stage of his business development when financial backup was no longer required. Although he was ‘pushed’ into self-employment because it was difficult to find full-time employment in his sector, at the time of the interview, the respondent said that he was satisfied with his self-employment choice because it provides him with an opportunity to manage his own business affairs, to diversify his services (e.g. personal training, therapy, consulting, education), and to work with different clients. Although the vast majority of his clients are Germans his business networks consist of people of different nationalities divided in three clusters (Figure 12). The first cluster emerged from his activities in a football club in which he was a player in his teenage years and has been involved in developing training and marketing concepts since he started his sports studies. He mainly provides these services on a voluntary basis but his weak ties to the football trainer and two football players there are an important source of client acquisition for his own business. The second cluster arose from his activities as a part-time employer in a fitness studio where he collaborates with the owner and four other trainers. He sees his university degree in sport sciences as a main competitive advantage compared to most other trainers in the fitness sector. Apart from personal training, he offers health and fitness consulting as well as training concept development to his clients. Although his businessrelated relationships involve reciprocity and trust, when dealing with clients he prefers purely contract- and price-based relationships. Although the respondent has a mixed private social network mainly consisting of strong ties with FSU migrants and weak ties with individuals outside FSU migrant community, he has no experience of working with clients from the FSU migrant community.

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Figure 12: Business network of a sports business

Note: Circles indicate individuals, squares indicate groups of people or organisations.

Just a few days before the interview, the respondent started actively advertising his business on Facebook, but most of his existing clients were forwarded to him by his contacts in the two clusters mentioned above representing his network of industry or approached him directly in the fitness studios or at various sports-related events: ES: Did you look for your clients yourself or did they approach you?

7.4 Examples of business networks in mainstream market

233

Int. 4: Partly I was recommended to them and party they approached me. If you work as self-employed in a fitness studio, others will approach you. […] ES: And how did you find the important contacts for your self-employment? Int. 4: Through my hobby. I mean through football. A lot of clients via football. And word of mouth. Football has helped me a bit. […] If you have a big circle of friends, then you will automatically get some clients that are valuable for your business. (Int. 4, D, sport business, male, 30) The third cluster in the network map represents respondent’s business-related relationships in the FSU migrant community. These are strong ties to three Russian-speaking self-employed friends that are less relevant for client acquisition as compared to the other two clusters but they are important for information exchange and practical help. This third Russian-speaking cluster is very important for the respondent as an informal platform for developing new business ideas. For example, his school friend is running a business developing functional sports clothes and the respondent supports him as a distributor for his products at favourable conditions. The other two Russian-speaking actors, former fellow students, are running a sport business together in a different Germany city and the respondent planned to collaborate with them to extend his business activities geographically. The respondent prefers to keep the three clusters in his business network separately, avoiding interconnecting actors from different clusters. He frequently travels to Moscow and expressed aspirations of getting involved in transnational entrepreneurial activities in the future.

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7.5 Conclusions This chapter focussed on migrant businesses operating in the mainstream market that predominantly serve the general population. The chapter illustrates that the access and use of social capital by businesses operating in the mainstream market differs between businesses in low entry barrier sectors as compared to businesses providing knowledge-intensive services. Whereas informal relationships and business-related ties in the FSU migrant community were important for businesses operating in segments with low entry barriers, business-related weak ties to co-ethnics were hardly relevant for businesses in knowledge-intensive sectors of the mainstream market. Both groups, however, usually had some strong ties in the FSU migrant community that were relevant for their businesses, especially in the early stages of business formation. Although operating in the mainstream market and targeting general population clients, interviewed businesses in sectors with low entrance barriers often mentioned their preference of co-ethnic staff that was usually recruited through own personal circle or on recommendation to reduce the risk of uncertainty. Non-co-ethnic staff was usually taken over by ‘take over’ businesses with previous German owners or by businesses that required a relatively large amount of staff in sectors with frequent change of staff. Transnational social capital was usually not relevant for this type of businesses. Businesses in high-skilled knowledge-intensive sector of the mainstream market were usually run by younger respondents who studied in Germany and could rely on professional networks of the host society for client acquisition and search of potential collaborators. They preferred specialised ties (Wellman 1984) and price-regulated

7.5 Conclusions

235

relationships with their clients that were a combination of formal contract-based relationship and professional ties involving reciprocity with their business partners. Respondents’ knowledge, skills, and work experience served as a guarantee of their reliability and competence for their business partners. Most of interviewed businesses in knowledge-intense mainstream market sector did not have any staff and were freelancers but businesses with staff assigned to this category usually hired staff outside the FSU migrant community. In general, this group had business-related relationships mainly outside the Russian-speaking migrant community and mostly used their network of industry as a source of social capital for their businesses. They also showed higher institutionalised trust and more often used professional business consulting services. Apart from embeddedness in social networks of host population in the receiving country, sporadic complementary transnational entrepreneurial activities were relatively common for this group of businesses. However, these activities usually did not involve the country of origin but other countries and relevant transnational social capital was acquired after migration to Germany, mostly through the network of industry. Despite desired distance to Russian-speaking clientele, both groups had a relatively strong identification with the Russian-speaking community and their private social networks mostly consisted of other FSU migrants. However, it should be mentioned that private networks of respondents operating in the knowledge-intensive sectors of the mainstream market were more ethnically mixed, and this study does not include second-generation migrants for whom an ethnically mixed network would probably be more common (Rusinovic 2006).

8 Transnational entrepreneurial activities (TEA) Although social capital is primarily a local resource it can be transferred in the migration process, especially in case of chain migration, resulting in transnational networks (Faist 2000b). In the last two decades, transnational entrepreneurship of migrants has gained increased attention in migration studies (e.g. Bagwell 2015; Drori 2009; Light 2008; Portes et al. 2002; Zhou 2004). Migrants involved in transnational entrepreneurial activities can take advantage of their transcultural competences (Koehn & Rosenau 2002; Schaland 2013) such as language skills, knowledge of international markets, as well as ability to flexibly operate between different cultural systems and structural frameworks (Light 2008). In addition, social networks across borders are seen as an important resource for transnational entrepreneurship (Chen & Tan 2009). Portes et al. (2002) define transnational entrepreneurs as ‘self-employed immigrants whose business activities require frequent travel abroad and who depend for the success of their firms on their contacts and associates in another country, primarily their country of origin’ (Portes et al. 2002: 284). Such a definition only takes into account businesses that use transnational entrepreneurial activities as their central business strategy. Several empirical studies (e.g. Itzigsogn et al. 1999; Rusinovic 2008), however, have demonstrated that transnational entrepreneurial activities of self-employed migrants can vary with regard to their intensity and formalisation degree and can be used as a complementary business strategy. Looking only at transnational entrepreneurship in a narrow sense neglects the role of sporadic transnational involvement for migrant businesses that is more common than regular transnational economic involvement. Apart from that, with the increasing use of modern communication technologies, virtual networks have gained importance, reducing the need for frequent travel abroad (Terjesen & © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 E. Sommer, Social Capital as a Resource for Migrant Entrepreneurship, https://doi.org/10.1007/978-3-658-29141-9_8

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Elam 2009). Further, migrants use both local networks and networks abroad for their transnational economic activities. Existing studies describing the self-employment of FSU migrants (Kapphan 1997; Leicht et al. 2005; Sommer 2011) show that despite the fact that a large proportion of FSU migrants have dual citizenship, which is favourable for transnational entrepreneurship, transnational business interactions as the central strategy in the sense of narrow economic transnationalism (Itzigsohn et al. 1999) are relatively rare among FSU migrant businesses. Sporadic temporary transnational entrepreneurial activities that are used as a complementary strategy in the sense of broad economic transnationalism (Itzigsohn et al. 1999) are more common (Sommer 2008). This chapter explores what kind of social capital FSU migrants use (in terms of its geographic composition and contact paths relevant for the formation of business networks) when they get involved in different types of transnational entrepreneurial activities. The term transnational entrepreneurial activities (TEA) is used rather than transnational entrepreneurship to refer to a wide range of business activities involving regular or occasional cross-border interactions that can vary in nature, intensity, and formalisation degree and that do not necessarily build the central strategy of the firm as in the case of transnational entrepreneurship as defined by Portes et al. 2002. The first section of this chapter provides an overview of interviewed businesses that were involved in transnational entrepreneurial activities at the time of the interview or at an earlier time point in their entrepreneurial career. It is followed by the section describing the forms of transnational entrepreneurial activities. The third section deals with the motivation for engaging or not engaging in transnational entrepreneurial activities. It is succeeded by the section presenting the empirically derived types of transnational entrepreneur-

8.1 Overview of interviewed businesses involved in TEA

239

ial activities and their main characteristics with regard to social capital. An illustrative case example and a brief summary of findings conclude the chapter.

8.1 Overview of interviewed businesses involved in TEA Out of 65 interviewed self-employed, 37 were involved in transnational entrepreneurial activities (TEA) at some point of their entrepreneurial career (Table 10). Some respondents were involved in several types of TEA during their entrepreneurial career mostly replacing one type of TEA with another or giving up TEA in favour of local business in Germany. Businesses ‘born global’ (Knight & Cavusgil 1996), in the sense that they targeted a foreign market as the main market from inception, were relatively rare. Most interviewed businesses (21 respondents) used TEA as a complementary strategy while mainly targeting the domestic market in Germany. An additional three respondents started their business as a transnational enterprise but changed their strategy from intensive to complementary use of TEA in favour of a domestic market at a later time point. Thirteen interviewees were involved in intensive TEA, but six of them moved to a different business targeting the local market in Germany, giving up TEA at a later time point or giving up self-employment completely. Ten respondents using TEA were involved in multiple businesses. Among the interviewed respondents, men were more likely to get involved in TEA than women (12 women compared to 25 men, Table 11). Women mostly got involved in complementary TEA; only two female respondents used TEA intensively as their central strategy.

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8 Transnational entrepreneurial activities (TEA)

Table 10: Overview of interviewed businesses involved in TEA Business StaInt. with TEA tus EsIT tab1 services lished Travel Start5 agency up

6

7 8

10 13

Car export Sports clothes production Music education Child education Translation services

Required skill level

TEA type*

High Low/ middle

C

EstabLow/ lished middle

C

Country of origin Country of origin Country of origin + other country

Startup

High

C

Other country

Startup

High

C

Startup High Established High

I

GenMigrant der Age** group*** w

38

EG

w

52

EG

m

54

EG

m

29

OM

w

31

OM

w

40

JM

C

Country of origin Country of origin & other country

C

Country of origin

w

33

OM

Other country

m

30

EG

m

42

EG

w

43

JM

w

30

JM

Low/ middle

I

16

Transport Startservices up EsCar tabexport lished

Low/ middle

C

17

Book shop

Startup

Low/ middle

C

19

Music performances

Established High

15

Involved countries

C

Country of origin Country of origin & other country Country of origin & other country

8.1 Overview of interviewed businesses involved in TEA

Business Int. with TEA Food 20 shop Production of mobile phone accesso23 ries Car 24 export Insurance 26 trade Clothes export, raw materials 27 import Care service & medical 28 tourism Antivirus software 29 trade 30 33 34 36 37

Print design Advertising agency Real estate business Travel agency Textile export

Required Staskill tus level Given Low/ up middle

TEA type* C

Involved countries Country of origin

241

GenMigrant der Age** group*** w

60

EG

Given up High Given Low/ up middle

I

Country of origin + other country Country of origin

Startup

C

Country of origin

m

32

OM

Given Low/ up middle

I

Country of origin

m

48

EG

Startup

I

Country of origin

m

33

JM

Low/ middle

Low/ middle

I

m

40

OM

m

39

EG

Given up High Established High

I

Country of origin

m

46

JM

C

Country of origin

m

61

OM

Startup

High

C

Country of origin

m

30

JM

Startup Startup Startup

Low/ middle Low/ middle Low/ middle

m

29

JM

w

44

JM

m

27

JM

C C From I to C

Country of origin Country of origin Country of origin

242

8 Transnational entrepreneurial activities (TEA)

Business Int. with TEA Translation ser40 vice Clothes 42 shop Business travel 44 service Web de45 sign Export of technical equip49 ment

Status

Required skill level

Startup Startup

High Low/ middle

I

Low/ middle

I

High

C

Startup Startup

Given Low/ up middle

50

Wedding shows

51

Car export

Established Established

Car export Transportation service

Established Established

53 57

Car export Insurance 61 trade Holidays apartment 62a rental 60

Established Established Startup

TEA type* C

Involved countries Other country Other country Country of origin Other country

GenMigrant der Age** group*** w

24

JM

w

43

OM

m

28

JM

m

35

JM

m

40

JM

m

28

JM

Low/ middle

C

Country of origin Country of origin & other country

Low/ middle

C

Country of origin

m

32

EG

Low/ middle

From I to C

Country of origin

m

38

EG

Low/ middle

I

Other country

m

58

EG

Low/ middle

From I to C

Country of origin

m

44

EG

Low/ middle

C

Other country

w

36

JM

Low/ middle

I

Other country

m

57

EG

I

8.1 Overview of interviewed businesses involved in TEA

Business Int. with TEA Business consult62b ing

Required skill level

Status Established High

243

TEA*

Involved countries

GenMigrant der Age** group***

C

Country of origin

m

44

JM

Furniture Given Low/ Country 62d export up middle I of origin m 52 OM Note: *I - Intensive TEA, C – Complementary TEA; **Respondent’s age at the interviewer; ***EG – FSU ethnic Germans, JM – FSU Jewish migrants, OM – other FSU migrants.

TEA were especially common for the ‘other FSU migrant’ sample. Eight out of nine interviewed FSU self-employed migrants in this study that migrated to Germany neither as FSU ethnic Germans nor as Jewish migrants were involved in TEA (Table 11). Compared to the two major FSU groups who usually migrated to Germany with their families consisting of several generations, these migrants mostly came to Germany because they married someone living in Germany. They usually had immediate family and friends in their country of origin and maintained social relationships there which, in turn, were beneficial for their transnational business activities. Ethnic Germans and Jewish migrants made use of extended and distant family as well as acquaintances for TEA in the country of origin. The youngest respondents involved in TEA was 24 years old and the oldest 61 years old. While involvement in TEA was common in different age groups among interviewed Jewish respondents and in the ‘other FSU migrants’ sample, young (under 35 years old) interviewed FSU ethnic Germans rarely got involved in TEA (Table 11). Involvement in TEA was particularly common for businesses that were given up over time: all seven given up businesses interviewed for this study were involved in TEA at some point of their business development.

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Table 11: Summarised overview of businesses involved in TEA Ethnic Germans

Jewish migrants

Other FSU migrants

Total

Low/middle-skilled businesses

12

9

3

24

High-skilled businesses

1

7

5

13

Start-up

3

10

4

17

Established (>5 years)

7

4

2

13

Given up

3

2

2

7

Female

3

6

3

12

Male

10

10

5

25

50 years old

5

0

2

7

Total

13

16

8

37

Required skills level

Business status

Respondent’s gender

Respondent’s age

The interviewed self-employed migrants employed diverse and dynamic TEA. The diversity is reflected in different forms of activities, different degrees of intensity and formalisation of TEA, as well as in terms of involved countries and use of different contacting paths. Several studies have demonstrated that TEA of self-employed migrants benefit from existing pre-migration contacts and especially from ties with the extended family abroad (e.g. Bagwell 2008, 2015; Mustafa & Chen 2010; Rusinovic 2006, 2008; Urbano et al. 2011). Pre-migration contacts and specifically strong ties are particularly important for providing financial start-up capital. Existing transnational contacts are also often directly involved in TEA serving as

8.1 Overview of interviewed businesses involved in TEA

245

trust persons or as intermediaries providing access to relevant social networks (Rusinovic 2006). However, having relatives or relevant business-related contacts in the country of origin prior to the start of the self-employment is not a necessary condition for TEA involvement. As will be demonstrated throughout this chapter, migrants use a variety of channels to get access to relevant businessrelated social networks. Migrants can have family members in different countries or acquire transnational business contacts directly through their network of industry or their connections in diasporic nodes (communities of migrants of same origin in different geographic places, Voight-Graf 2004). They use both pre-migration and post-migration ties developing TEA. Several respondents applied post-migration referrals by co-ethnics and direct approach of previously personally unknown relevant persons and organisations abroad. Although TEA usually involve the countries of destination and origin, eight respondents were involved in TEA with countries other than their country of origin. Transnational businesses of migrants are characterised by dual affiliation and a simultaneous engagement in markets both in the host country and at least one other country (Drori et al. 2006). Whereas TEA in the country of origin were usually linked to the migrant market or mixed market, TEA in other countries were linked to the mainstream market in Germany. Recent research shows that transnational entrepreneurship is increasingly becoming characterised by multi-polar rather than bipolar links (Bagwell 2015). Six respondents were involved in multidirectional TEA involving both their country of origin as well as other countries. As TEA activities, especially complementary, are usually linked to one of the markets in the country where migrants live (migrant, mixed, or mainstream market), migrant entrepreneurs get involved in ‘glocalised networks’ (Wellman 2002), interacting with both local and transnational business-related ties simultaneously or sequentially.

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8.2 Forms of transnational entrepreneurial activities The following section presents different forms of transnational entrepreneurial activities found in the empirical data. Transnational entrepreneurial activities of migrants are often associated with export and import practices in a broader sense. For the interviewed FSU migrants involved in TEA, export activities from Germany to the country of origin or other countries were more common than import activities. Not only goods but also services and innovations can be exported or imported whereby a clear allocation to only one of these categories is not always possible and there can be overlaps. In particular, the category of export/import of innovations usually involves simultaneous export/import of goods or services. The innovative character of the product or service is, however, crucial for the competitive advantage and the success of the business activity. In addition to export/import activities, TEA can also involve monetary investment (for example, financial investment and participation in businesses, purchase of real estate) in different directions (from receiving country to the countries of origin or third countries and vice versa). Further, some of the businesses involving TEA offer Germany-related services to customers from FSU countries visiting Germany (e.g. Russian-speaking city tours, interpreting services, assistance with attending trade fairs or business events in Germany, or medical tourism to Germany). Import and export of goods The import of goods from the successor states of the former Soviet Union on a regular basis is relatively rare. More frequently, goods are sporadically imported to Germany if there is a specific demand from customers. For economic reasons (for example, high transport costs and high import charges), most goods in ‘Russian’ supermarkets are either manufactured directly in Germany or imported from

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247

Eastern European EU countries to avoid the direct imports from the non-EU FSU countries. Mostly small shops import products on demand (e.g. book stores and grocery shops) as an extra loyalty service that provides them with a competitive advantage compared to bigger stores, especially chain supermarkets. Such sporadic import activities are mostly informal practices based on reciprocity facilitated by existence of relevant social ties in the country of origin. The imports are usually organised by relatives, friends, and acquaintances. An interviewed owner of a bookshop, for example, explained that she activates her social ties to former colleagues in a publishing house in Russia to get access to books that are not available through online trade in Germany or are limited editions. In order to compete with other Russian bookstores and online book providers, she offered this service of ordering books on demand to her customers as a unique selling point. The support from former colleagues had a nature of making a favour to a friend and the respondent mentioned that though it was generally very helpful, she had to sometimes deal with uncertainties such as, for example, not knowing how much time it will involve or reliability of promises. She expressed several times during the interview a wish to be able to have formal business relationship on a regular basis directly with the publishing houses in the FSU countries instead of dealing with wholesale companies in Germany and relying on support from her friends. However, this was not feasible due to the lack of a budget for high customs charges for the import of non-EU goods and frequent travel to Russia as well as a need for additional employees who could regularly travel to Russia. As the respondent was in her start-up phase and had limited financial resources, she decided to use what she herself calls a ‘combined model’ hoping that she will be able to formalise and intensify business relationships with Russia in the future. The export of goods to the FSU countries was mentioned more often than import of products. Several interviewed male respondents were exporting goods from Germany to the FSU countries in the 1990s

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and early 2000s on a regular basis but gave up this strategy completely or reduced it to sporadic activities at a later time point. After the collapse of the Soviet Union, there was a growing market for second-hand cars and technical appliances from Germany. Some FSU migrants living in Germany saw a lucrative business opportunity resulting from this demand. Although respondents previously involved in such export activities were satisfied with their profit, after a few years they decided to give it up either partially or completely. The main reasons were the need for frequent travels between different countries as most respondents were transporting their export goods personally, dealing with formal and informal practices at various border controls and customs, the risk of loss of control in one of the countries during longer periods of physical absence, and corruption and economic instabilities in the FSU countries. Especially in the 1990s the trade in transforming FSU countries was characterised by a high degree of corruption, informal practices, and frequent law changes (Ledeneva 2006). The prevalence of informal practices can be interpreted as a reaction to inefficiency and deficits of formal structures and institutional governance (Lovell 2008). Unspoken toleration of informal practices by authorities was associated with certain economic benefits for transnational businesses that were able to operate between various informal structures. As informal practices often involve trust, there was a need for finding ‘persons of trust’, especially vertical ties with authorities who could facilitate access to certain resources such as, for example, information or help with administrative procedures. A respondent who was involved in car trade in the 1990s mentioned some of the difficulties related to this issue: Especially in the 1990s it was easy. You take the passport and put 20 Mark inside (at border control). In these days, you were done with it and everything was settled. After some time 20 Mark were not enough anymore, they wanted higher prices. This was the system. There

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249

were no alternatives in the East. After some time, you met a ‘person of trust’. But at the Belorussian-Polish border they changed the entire staff every six months. And this was done to ban established contacts. You arrive there again and suddenly you don’t know anyone. Which means you need to start from the beginning again until you are done with it (Int. 60, W, car export, male, 44). Despite the increasing formalisation of the FSU trade markets in the last two decades, import and export of products from the FSU countries is relatively rare among FSU migrants in Germany. Apart from migrants’ resources, such activities depend to a high extent on the changing politico-institutional framework in involved countries in the sense of the mixed embeddedness model (Kloosterman & Rath 2001), and for most respondents they were associated with high risks due to economic and political instabilities in the FSU countries. Import and export of services While exporting or importing goods on a regular basis often requires crossing physical national borders and frequent presence in both countries, modern communication technologies enable rapid exchange of services without the need for physical presence. This is illustrated by the example of an IT company presented in Section 7.4 that has been employing three programmers in Russia for over 10 years. The owner of this IT company speaks of ‘outsourcing’ for economic reasons as employing programmers in Russia reduces staff costs. Except for two IT companies, import of services was relatively rare among interviewed businesses and was applied as a sporadic complementary strategy (e.g. legal or business consultations, hiring teachers or artists for specific events). These activities were usually price-regulated activities whereby personal contacts in the network of industry in the country of origin were activated to get access to relevant professionals.

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The export of services from Germany to the FSU or other countries was mentioned more often than import of services in the interviews and usually involved such activities as translation services, teaching, business consulting, and music performance. Depending on the business, transnational activities involving export of services were either a regular part of the business or were complementary. Export of services often required physical travel to the other country but usually not on a regular basis. The establishment of relevant business-related contacts was rarely via personal private circles but usually via the professional network, recommendations, professional agencies, relevant online portals as well as by direct approach of potential clients (mostly via Internet search). Import and export of innovations Examples of innovations that are imported from the FSU countries found in the interview data were mostly cultural or educational innovations that are especially relevant for businesses offering ethnically associated services to the FSU migrant community (e.g. wedding entertainment, child complementary education, translation services). Although knowing the preferences and tastes of co-ethnics is seen as strength of migrant entrepreneurs, overtime these tastes change. Apart from being influenced by preferences and tastes of the host society, migrants arrive in Germany at different time points and their knowledge of cultural development in their country of origin is influenced by the duration of their stay in Germany. Some businesses providing ethnically associated services to the FSU community serve as a bridge between the migrant community and the country of origin by ‘updating’ migrants’ cultural knowledge. In order to stay up-to-date, they ‘import’ cultural innovations to Germany, for instance by inviting experts living in FSU countries for events to Germany or attending relevant events in the FSU countries and getting involved in exchange programs. Being informed about ‘cultural innovations’ and changing preferences is also important for Germany-

8.2 Forms of transnational entrepreneurial activities

251

based businesses working with clients living in FSU countries (e.g. medical tourism, organising trade fairs and business travels, guided tours for tourists). Interviewed businesses importing innovations usually used their professional networks in the country of origin in order to stay up-to-date about innovations in their sector. These types of transnational cooperation were usually informal, but formal cooperation was prevalent in the education sector. With regard to export of innovations, several interviewed self-employed detected market gaps by comparing the markets in Germany and their country of origin. They developed a business strategy aiming at filling these gaps with products or services that were not yet available in these markets and were, therefore, innovative to the market. For example, one interviewee running a mobile care service company in Germany realised that in his town of origin in Ukraine there were no similar care structures. In Ukraine, he got in touch with local health authorities and introduced to them a model of mobile care system that he developed for Ukraine similar to his business in Germany. He decided to open a parallel care business in Ukraine. Because of his pioneer status he is considered as an expert in this sector and provides consultations to municipalities in several towns in Ukraine. Usually export of innovations mentioned in the interviews required strategic marketing, financial investment, and access to vertical social capital in the country of origin. In addition, such transnational entrepreneurial activities were associated with the uncertainty risk with regard to the demand for such a particular innovation in the target market. Therefore, a thorough market analysis as well as the analysis of the structural and legal framework was needed which required investment of resources for search for target clients, business partners, and advertising channels, as well as for legal consultations. Further, to minimise risks of uncertainty with regard to market success of unknown products or services in a new market, at

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least in the beginning, the interviewed self-employed had usually to bear liability with their own financial investment. One of the respondents discovered a market gap in a niche market for large-sized clothes in FSU Central Asia countries and approached a German plus-size clothing retailer that operated shops on franchising basis in Germany and abroad. The respondent explained that he would like to explore the possibility of opening shops of this brand in his home country of Kazakhstan and in Uzbekistan where he had the relevant social contacts. He suggested traveling to these two countries with the goal of finding interested business partners there and becoming an intermediary person between the German company and the franchising partners in Central Asia. The respondent was unemployed at that time and did not have the budget to organise such a trip. The German company showed interest as they did not have any representatives in Central Asia so far and offered him to reimburse the travel costs in case he found at least one franchising partner there, but it was not willing to provide a travel budget in advance as there was no guarantee that this trip would result in successful outcomes. Although the respondent had relevant horizontal weak ties in his country of origin that showed potential interest in his business ideas, they did not trust the respondent enough to invest their own financial resources to facilitate it. Although weak ties facilitate exchange of non-redundant information and are associated with generating new business ideas, they do not guarantee getting reliable information and commitment that require mutual trust (Ulhoi 2005). Access to vertical social capital and availability of trustful persons were particularly important for export of innovations.

8.3 Motivation for engaging and not engaging in TEA

253

8.3 Motivation for engaging and not engaging in TEA In her study of first- and second-generation self-employed migrants in the Netherlands, Rusinovic (2006, 2008), applying a broader understanding of transnational entrepreneurial activities, analyses the reasons for getting involved in TEA differentiating between economic motivation (e.g. TEA is an essential part of export and import businesses or TEA as a strategy of an additional economic gain) and non-economic motivation (e.g. idealistic motivation such as a wish to be linked to the country of origin and to contribute to its economy). She also looks at reasons for not engaging in TEA and identifies the following three main reasons: TEA are irrelevant for business; TEA are not attractive because of the unstable economic situation in the country of origin or because of the way the business is run there; and lack of transnational social capital and persons of trust in the country of origin. Economic motivation was the main drive for the interviewed FSU self-employed for getting involved in TEA. Idealistic motivation was rarely mentioned. For some businesses (e.g. transportation and courier businesses) getting involved in TEA in multiple countries was a necessary part of business rather than a matter of choice. The reasons for not getting involved in TEA were similar to those identified by Rusinovic (2006, 2008) in her study. A study by Brzozowski et al. (2014) demonstrates that politico-institutional and economic characteristics of the home country have crucial roles in shaping the relationship between the use of transnational ties and performance of the firm. Especially, the unstable economic and political situation in the FSU countries as well as high degree of informality, corruption, and opportunism in business operations were frequently mentioned. Further, unfavourable trading conditions between EU and non-EU countries were mentioned making involve-

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ment in formal regular TEA outside the EU for some businesses unattractive. Apart from uncertainty risks and politico-institutional constraints, lack of persons of trust to monitor the business in absence of the owner was seen as another challenge, as illustrated in the following quote: This unpredictability in Russia is huge. And apart from that, if you are doing business there, you do it from here, or you need to live there. And this is a problem as you should always look over their shoulders. (Int. 30, D, print design, male, 61) According to Guarnizo et al. (2002: 10) ‘the larger or more difficult the attempted transnational project is, the stronger the social networks required to sustain it’. As self-employed migrants usually continue living in the country they migrated to, they need to monitor their business across borders and rely on people managing their business abroad during their absence. To minimise risks of opportunism and uncertainty, finding persons of trust is considered by some respondents as a condition for getting involved in TEA in FSU countries. Several respondents involved family members and trusted acquaintances to oversee the business abroad in order to overcome this challenge (see for example the case illustration in section 8.6). Related to the need being present at several places in at least two different countries, respondents who moved from intensive TEA to sporadic TEA often mentioned that frequent travel and long absence from their families were reasons why they decided to give up intensive TEA, even though they earned well. The domestic market in Germany was seen as a more attractive alternative as mentioned by a respondent involved in car export in the 1990s: This was not attractive for me in the long-term perspective because things run smoothly only if you are personally present there all the time. And I was not particularly

8.3 Motivation for engaging and not engaging in TEA

255

keen on permanently being there and traveling. And we realised that we should not underestimate the potential of the local market which is just in front of your door. (Int. 60, W, car export, male, 44) Two of three companies involved in intensive TEA at the time of the interview (an IT company used as a case example in section 7.4 and a company providing business travel services) reported that they managed to overcome the monitoring challenge, despite the distance and physical absence, by being present with regular use of virtual communication with business-related networks, and there was no need to travel to the country of origin. To quote Terjensen & Elam (2009): ‘Transnational entrepreneurs rely on physical and virtual social networks and structure these networks to bridge new opportunities and often position other actors as intermediaries’ (Terjensen & Elam 2009: 1115). The third company engaged in intensive TEA at the time of the interview (care service in Ukraine and medical tourism) relied on physical presence in the inception stage of the business formation when it was especially important to be present at negotiations with previously personally unknown business partners and authority representatives. After meeting the relevant contacts in person and finding persons of trust and intermediaries reporting to the business owner in Germany, the need for frequent travel decreased and physical absence was compensated by regular virtual communication. Despite the mentioned challenges associated with TEA, several younger respondents who were not engaged in TEA showed ‘transnational aspiration’ by mentioning that they planned to get involved in TEA in the future. Most of them had complementary TEA in mind targeting at additional economic gains. Several younger high-skilled respondents, however, also expressed non-economic motivation such as curiosity about how business is run in their country of origin and exploring unknown markets and potentials.

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8 Transnational entrepreneurial activities (TEA)

8.4 TEA of temporary returnees A growing number of studies deal with migrants who return to their country of origin after a temporary stay abroad and start their own business there (e.g. Filatotchev et al. 2009; Liu et al. 2009; Saxenian 2006; Wright et al. 2008). According to the ‘brain circulation’ argument, especially highly skilled migrants returning to emerging economies after studying or working in developed economies can gain competitive advantages compared to domestic entrepreneurs due to their human capital, technological expertise, and transnational social contacts (Drori et al. 2009). To quote Drori et al. (2009: 1005): Their business and technological expertise, combined with local skilled labor, can provide an important stimulus to the development of high-tech industries located in science parks in emerging markets (Wright, Liu, Buck, & Filatotchev, 2008). There may also be other spillover benefits through the enhancement of the technological capabilities of local firms, replacing a “brain drain” with “brain circulation” (Liu, Lu, Filatotchev, Buck, & Wright, 2009; Saxenian, 2006). Although they may no longer have direct business interest in the foreign country from which they have returned, the international social and human capital they have developed can help facilitate exporting activities of the ventures they establish in their home country (Filatotchev, Liu, Buck, & Wright, 2009). Most empirical studies dealing with self-employment of returnee entrepreneurs analyse entrepreneurial activities of former migrants who plan a permanent or at least a long-term return to their country of origin. There is a lack of studies looking at entrepreneurial involvement of temporary returnees. First, temporary returnees seem to be less likely to open a business. However, there is no empirical

8.4 TEA of temporary returnees

257

evidence for this assumption. Second, there are empirical challenges to identify temporary returnees for research. Four respondents interviewed for this study reported about a temporary return to their country of origin for up to two years where they got involved in TEA with Germany. It is questionable whether they are comparable to other migrant entrepreneurs involved in TEA because their businesses were registered in the country of origin where they were temporarily living. Therefore, they are not included in the overview table (Table 10) and were excluded from the typology presented in the next section. The temporary return to the country of origin happened for various reasons. Usually it was a combination of several reasons. Similarly to motivation for temporary return identified by Schmitz (2013) in the study of highly skilled young ethnic Germans, identity search, nostalgia, desire to learn more about own cultural roots, a wish to contribute to home country’s development, as well as a wish for a transnational career in the future were common reasons for a temporary return. Further reasons for a temporary return were having a romantic relationship in the country of origin, studying there, and detecting business opportunities. Most respondents involved in these types of activities were relatively young at the time of their return (between 23 and 32 years old). They were not planning an ultimate return to their country of origin but rather a longer stay there and tried to maintain their social ties in Germany for their return. Generally, they were relatively well structurally and socially integrated in Germany but understood their own cultural identity as hybrid. They maintained social relationships in their country of origin after their migration to Germany and tried to take advantage of their knowledge of different cultures and languages as well as their transnational social capital for their entrepreneurial activities.

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Respondents spent between one and two years in their country of origin before coming back to Germany. Three of the four interviewed temporary returnees had a dual citizenship which made stays in both countries without any time restrictions and needs for visas possible. Respondents saw their temporary return predominantly as a possibility to gain new valuable experience and an opportunity to realise their ideas. Temporary returnees usually used pre-existing pre-migration social relationships, predominantly strong ties (family and friends), in the early stages of their return and invested in building up further social business-related relationships that could be beneficial for their entrepreneurial activities. They also used their social capital in Germany for their business activities during their stay in the country of origin. Although the main target of their entrepreneurial activities was the domestic market of the country of origin, sporadic transnational entrepreneurial activities with Germany were used as a complementary strategy to achieve competitive advantages. Such TEA usually had an informal character based on reciprocity. As demonstrated in the following example, the business experience in the country of origin during the temporary return could be beneficial for getting access to relevant business-related contacts for future self-employment in Germany as well as a means to acquire the necessary financial start-up capital. One of the respondents involved in car repair and trade business at the time of the interview explained that he spent a year and a half in Kazakhstan before starting up his business in Germany. He migrated to Germany as FSU ethnic German with his family in 1993 at the age of 20. After finishing his apprenticeship in Germany, he went back to his home country Kazakhstan in 1996. A permanent return was not planned because the respondent wanted to live close to his parents. As he was planning to start his own business in Germany, he decided to go back for some time in order to earn there the financial start-up capital for

8.4 TEA of temporary returnees

259

his business. It was a strategic decision as he realised that there were potentials for economic profits in a relatively short time, especially for informal activities, as Kazakhstan’s economy was in a transformation stage and there was a demand for different products and services. To quote the respondent: ‘These were times when you could make money out of air’ (Int. 53, W, car export, male, 38). Using his savings from Germany and existing contacts in Kazakhstan, the respondent got involved in a barter business exchanging brown coal for beef meat. This was an informal business in which he spent three months. After gaining enough profit, the respondent invested the money to purchase vans in Germany used for transporting people. As there were no other foreign vehicles at that time in the place where he was based, the customers were ready to pay a higher price to travel with his vans. At that time, the respondent intensively studied the market and worked on getting access to social contacts that would be beneficial for his next entrepreneurial activity — export of cars from Germany to Kazakhstan. After a year he had saved enough money to open his planned car repair and car export business in Germany and had built relationships with social vertical ties in Kazakhstan that he used later for his transnational entrepreneurial activities (see case example at the end of this chapter): I came back to Germany before Christmas. […] But I came back here (to Germany) with the start-up capital. I earned quite well. And I established contacts relevant for the car business — export, customs clearance, and so forth. And then I started my business here. (Int. 53, W, car export, male, 38) After their return to Germany, all of the interviewed temporary returnees remained involved in transnational entrepreneurial activities (mostly as a complementary strategy) and could benefit from social ties they established during the temporary return to their country of origin.

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8.5 Types of transnational entrepreneurial activities19 Four types of transnational economic activities used by FSU migrants were identified in the interview data. The types empirically grounded were built according to the combination of involved countries and the intensity of transnational business activities: 

Involved countries – combination of countries that are involved in transnational entrepreneurial activities of interviewed migrants: host country (GER), country of origin (FSU), and other countries (OC). With multidimensional transnational entrepreneurial activities, there is a further differentiation between a loose form without connection between dyads (GER+FSU & GER+OC) and a connected form (GER+FSU+OC) where the main partners in all countries are linked to each other.



Intensity of transnational economic activities – follows the narrow vs. broad economic transnationalism approach by Itzigsohn et al. (1999) and differentiates between businesses that are involved in transnational economic activities on a regular basis and for which the transnational involvement is essential for the business (central strategy) and businesses that sporadically get involved in transnational activities which are rather complementary in nature and not essential for the survival of the business as a whole (complementary strategy).

For each identified type the main characteristics of involved transnational social ties were analysed reflecting the time point of the first

19

This section is partly based on Sommer & Gamper 2018.

8.5 Types of transnational entrepreneurial activities

261

contact, contact paths, and dominating types of business-related relationships: 



Time of first contact with main transnational ties – reflects at the time point of the first contact (pre-migration vs. post-migration) of the interviewed entrepreneur with relevant transnational business partners as some migrants mainly rely on the existing social capital in their country of origin, while others strategically build up new transnational business relationships after migration when they decide to become self-employed. Dominating contact paths – reflect the process and strategies of transnational networking. Migrant entrepreneurs, in developing transnational entrepreneurial activities, use both local and globalised social connections to exploit resources provided by social capital, not only in their country of origin but also in their country of destination and, to a lesser extent, in other countries (Chen & Tan 2009; Patel & Conklin 2009). They also use different contacting paths to get access to relevant business-related social ties. The following types of contact paths were identified in the empirical data used for this study: 1) direct use of existing transnational pre-migration ties; 2) direct approach of transnational business-related social ties to whom there had been no personal pre-migration contact; 3) referral to new relevant transnational contacts through existing pre-migration ties abroad; 4) referral to relevant transnational contacts through diasporic nodes (FSU migrant community in Germany and other countries) after migration; and 5) referral to relevant transnational contacts by persons living in Germany outside the FSU migrant community. Multiple contact paths can be used for the same transnational business activity.

262 

8 Transnational entrepreneurial activities (TEA) Dominating types of social relationships – reflect the nature of relationships with transnational business-related social ties differentiating between 1) weak and strong ties (Granovetter 1973); 2) formal and informal relationships; 3) arm’s-length ties (price-regulated relationships) and embedded ties (business relationships that involve a certain degree of trust and reciprocity, Uzzi 1997).

The four identified types of TEA are presented below. Type I: Complementary transnational entrepreneurial activities involving country of origin The first type, complementary TEA with the country of origin, is the most common type of TEA found in the empirical data: 15 respondents whose business primarily focused on the market in Germany sporadically got involved in complementary (temporary) TEA that were not essential for the overall success of their business but were perceived as facilitating additional economic gains and competitive advantages. This type of sporadic TEA reflects the broad economic transnationalism approach (Itzigsohn et al. 1999). Occasional complementary TEA do not require frequent physical travels between countries and they can be fostered by virtual cross-border communication. They also require less dual embeddedness in various political-economic institutional settings and are associated with less structural constraints in the sense of the mixed embeddedness approach (Kloosterman & Rath 2001) as compared to intensive TEA in the narrow sense that build the central business strategy. Complementary TEA are mostly oriented towards the opportunity side rather than the demand side. Local networks in Germany are essential for the self-employed migrants involved in this type of TEA as their main businesses are located in Germany, and existing social contacts in the country of origin are seen as a potential source for additional occasional business opportunities.

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The examples of complementary TEA range from sporadic import and export of goods on demand (e.g. privately organised import of requested items from FSU countries or export of cars to clients in Russia) to providing sporadic services on demand to FSU clients (e.g. translation of websites into German or selling city tours to clients from the FSU countries) and to financial investments (e.g. engagement in property business or financial participation in businesses in FSU countries). Most of these transnational economic activities were linked to the migrant market in Germany and most respondents involved in complementary TEA were mainly using their social capital in Germany for business purposes. When they occasionally got involved in TEA, they used predominantly weak ties to existing pre-migration contacts in their country of origin. These were mostly informal embedded ties involving some degree of trust and reciprocity. Some specific sectors, however, such as education or translation services, also involved formal, price-regulated transnational business relationships. As mostly existing pre-migration weak ties are used, they are often located in the respondent’s previous place of residence in the country of origin. Pre-migration weak ties are also often used as a forwarding channel to potential clients and business partners. Some respondents used Russian-speaking online social media as an advertising channel and to search for potential clients in FSU countries. Sometimes previously unknown clients contacted them via social networks where clients saw their advertisements there. In contrast, contacts in the Russian-speaking migrant community in Germany are rarely used for complementary TEA. Type II: Intensive transnational entrepreneurial activities involving country of origin The second type includes migrant businesses whose central business strategy involves regular and intensive TEA in the country of origin following narrow economic transnationalism (Itzigsohn et al.

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1999) or transnational entrepreneurship (Portes et al. 2002) approaches. These businesses were ‘born global’ (Knight & Cavusgil 1996; Welch and Luostarinen 1988) as targeting the foreign market was the initial central strategy at the business formation stage and did not occur in the course of gradual internalisation of the business. Regular intensive TEA require flexibility to adapt to different structural contexts that change over time as well as high investments in building business relationships of different nature in two different countries. Only three respondents (IT, care service, business travel service) were involved in this type of TEA at the time of the interview. Eight other respondents, however, reported that they were using this strategy for some time in the past. Most of them were involved in export of second-hand goods (e.g. cars, technical equipment, furniture) to FSU countries in the 1990s and early 2000s, and the duration of their post-migration stay in Germany when they started their business was relatively short. Export of goods was mostly linked to the mainstream market in Germany where the goods were purchased. The contacts in the FSU migrant communities were used to exchange information about suppliers of products in Germany. All respondents involved in intensive export of goods to the FSU countries gave up this business either partly or completely at a later time point. The main reasons for such a decision were the need of frequent travels between different countries as most respondents were transporting their export goods personally, dealing with formal and informal practises at various border controls and customs, the risk of loss of control in one of the countries during longer periods of physical absence, and challenges finding persons of trust as well as corruption and economic instabilities in the FSU countries. Most respondents who gave up intensive TEA with the country of origin mentioned that the politico-economic context in the FSU countries put structural constraints on their businesses that could not be compensated by mobilising their transnational social capital. According

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to Miera (2008), the relationships between and structural conditions in the countries that link TEA of migrants, especially political and economic aspects as well as geographic proximity, have an impact of involvement in TEA by different migrants group. In her study, Miera (2008) demonstrates that structural conditions are more favourable for TEA between Germany and Poland than between Germany and Turkey. From the respondents’ point of view, the current politico-economic relationship between Germany and non-EU FSU countries is not particularly favourable for trade and, therefore, intensive TEA with FSU countries were perceived as less attractive and more demanding than focusing on the domestic market in Germany. The three companies involved in intensive TEA with the country of origin at the time of the interview were businesses offering services. Apart from the IT company employing three programmers in Russia (case example in section 7.4) that moved from a migrant market to mainstream market and was not linked to the migrant market at the time point of the interview, the TEA of the other two companies were linked to the FSU migrant market in Germany. One business provided services to companies and individuals visiting Germany to attend business events (e.g. trade fairs, conferences, business meetings). The offered services included interpreting, transportation, event registration, design and production of info materials in German, hotel reservations, and organising of socialising events. The company functioned as an intermediary between the clients from the FSU countries and the businesses of other Russian-speaking migrants offering specific services on demand. The other company operated several care service businesses in Germany (for FSU migrants) and Ukraine. The respondent running these businesses had vertical ties in the health sector in Ukraine which contributed to the development of another business idea that he was implementing in Germany at the time of the interview. Parallel to his care businesses in Germany and Ukraine he had started a business offering services

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for patients from Ukraine seeking specialised medical treatments in Germany. This business benefited from the respondent’s extensive contacts with medical doctors in Ukraine who referred their patients to his company if the required medical services were not available in Ukraine. At the same time, the respondent made use of his contacts to Russian-speaking medical doctors in Germany which he had established through his care business for FSU migrants. The respondent functioned as an intermediary between the patients from Ukraine and medical doctors in Germany. All respondents except one involved in intensive TEA with the country of origin were male. In the start-up phase, most respondents following this business strategy were using their existing pre-migration relationships, a mixture of strong and weak ties, with persons in their country of origin. In order to ensure long-term development of their businesses, most respondents strategically extended their transnational business networks over time with new business contacts, especially to institutions and persons in higher social positions. The access to linking social capital (vertical ties) was usually mediated by already existing pre-migration contacts often involving the mechanism of transitive trust. Especially in the beginning of the transnational entrepreneurial career, informal relationships with high degree of trust and reciprocity played an important role for the business development. Their relevance, however, decreased over time and after the start-up phase respondents favoured formal business relationships that were regulated by prices and contracts. With increasing time spent in the market, most respondents were able to develop formal specialised business relationships by directly approaching potential business-related contacts themselves whereby longstanding entrepreneurial experience, market knowledge, and formal contracts served as a guarantee for reliability and trustworthiness and substituted the need for mediating persons. Despite increasing overall formalisation of business networks over time, most

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respondents, however, maintained some of the informal relationships because these relationships based on trust and loyalty provided them with additional competitive advantages mostly by enabling privileged access to information. As mentioned above, most of the respondents involved in this type of TEA at early stages of their post-migration entrepreneurial career gave up this strategy: they either dropped it in favour of Type I complementary TEA (three respondents), moved to a different business not involving TEA (two respondents), or gave up self-employment entirely (three respondents). Type III: Transnational entrepreneurial activities not involving country of origin Although most migrant transnational businesses involve interactions between the country of destination and the country of origin (Zhou 2004), some self-employed migrants get engaged in transnational entrepreneurial activities with other countries. In total, nine respondents were involved in this third type of TEA. Some specific branches involved in TEA in third countries. For example, companies transporting goods across borders or online retailers usually directly contact potential clients and business partners in other European countries and predominantly have formal contract-regulated relationships with them. The contacts in the FSU migrant community are, however, still considered important for staff recruitment. This type of TEA can be both a complementary (four respondents) and a central business (four respondents) strategy. It is characterised by the use of specialised transnational ties. Especially younger respondents involved in this type of TEA were mainly using their professional ties in the sense of network of industry (Drori et al.

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2009) to expand their economic activities beyond the country of destination. Similar to findings from the study by Gamper & Fenicia (2013), migrants with transnational contacts to third countries mainly acquired those contacts after their migration to Germany. In most cases they either spent some time in this other country (e.g. a graphic designer who went for one year for an internship to the USA and used the contacts he acquired during this time for his business in Germany) or they met a person from the third country in Germany (e.g. a software engineer who met a student from Czech Republic during his university study in Germany and now cooperates with his company). Five respondents involved in this type used primarily their network of industry for TEA in third countries. Whereas the pre-migration ties hardly play any role for this type of TEA, some respondents involved in this type of TEA were using their post-migration contacts in the Russian-speaking community for TEA in third countries (three respondents). They used the connections between the Russian-speaking community in Germany and Russian-speaking communities in diverse FSU diasporic nodes in Europe as mediating facility to enlarge their business networks (e.g. a clothes shop owner who was forwarded to a wholesale company in France owned by a Russian migrant by an acquaintance in the Russian-speaking community in Germany). Most respondents involved in this type of TEA predominantly used weak ties and their business ties had a nature of price-regulated arm’s-length ties (Uzzi 1997). Type IV: Multipolar transnational entrepreneurial activities The last type involves multipolar TEA using social capital in Germany, the country of origin, and at least one other country, mostly in the form of loose dyadic country connections: Germany with country of origin and Germany with third country (Type IVa: Multidimensional flexible transnational entrepreneurial activities). If one of

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the transnational country dyads proves to be problematic, termination of this business relationship is usually not essential for the further development of the business in general as the dyads are not interconnected. Respondents using this strategy flexibly react to the market situation and strategically incorporate economic practices in their social networks. They invest in maintaining social ties that could potentially be useful for their business in different places and different social environments and predominantly use weak ties to persons they have known before and after migration (see example of a musician in section 6.5). This type of TEA is predominantly a complementary strategy as respondents mainly focus their business on activities in Germany, but they use potential economic opportunities getting involved in sporadic transnational activities in multiple countries. A distinctive feature of this TEA type is a combination of various networks (network of origin, network of destination, and network of industry), various contacting paths, and a mixture of both informal and formal relationships. Business networks of migrants using this type of TEA are characterised by a prevalence of bridging social capital connecting migrants with heterogeneous actors in a similar social position. Most respondents using this strategy had an advantage of being able to flexibly react to market changes. Many of them have changed several business strategies during their career of self-employment or were running several businesses at the same time. They had contacts in diverse economic sectors and some of them had an intermediary role in the FSU migrant community by linking other selfemployed migrants with potential business partners in Germany and abroad and providing business consultations. Although most of TEA involved in this type were dyadic connections between two countries (four respondents), two respondents showed a triad of countries ‘Germany – country of origin – third country’, where all three countries were essential for the business and where

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the main business actors in these three countries were interconnected with each other (Type IVb: Triadic transnational entrepreneurial activities). This strategy involved a combination of various contacting paths and a mixture of formal and informal relationships. It was the central business strategy with a focus on a concrete business concept and required regular transnational interactions with countries involved. Both businesses involved a combination of production and distribution whereby the competitive advantage resulted from locating different business processes and tasks in different countries. One business specialised in importing British cars to Germany where they were adjusted (moving the steering wheel from the right side to the left side) for export to the FSU countries. Through his contacts in the FSU community, the respondent running this business connected with a Russian-speaking car trader in the UK from whom he purchases the cars. After adjustment, the cars are exported to Russia. Because the cars are imported from Germany they have a competitive advantage compared to similar cars that are usually adjusted and imported from Baltic countries, as Germany has a reputation of producing good quality. The respondent acts as an intermediary person in this business. This business complements his vehicle appraisal services. Because of his main business, the respondent has extensive contacts with car repair services and car export companies run by FSU migrants in Germany that he commissions for the wheel adjustment and car transport to Russia. In Russia, he has relevant contacts that are commissioned with finding clients for the cars. The other respondent using this business strategy calls it a ‘triangle’. His company was specialised in producing and distributing electronic accessories for mobile phones that were produced in China, shipped to Germany, and then sold in Russia. During his university study in Moscow, the respondent met a student from China with whom he stayed in touch after his migration to Germany. The former fellow student decided to participate in the respondent’s business

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idea as a financial investor and offer him support in China. He was accompanying the respondent to trade fairs in China where he could meet potential manufacturers, and after finding the manufacture he was monitoring their work, updating the respondent on the progress. The produced goods were shipped to Germany where they received the brand name of the German company before going to the Russian market. In Russia, the respondent used his existing pre-migration business contacts to find main distributors for his products. According to the respondent, the fact that his company was registered in Germany gave him the main competitive advantage as he could sell his products as a German brand and German brands have a good reputation in Russia: Made in Germany. Or for Germany. […] It’s all about image. As a German company we can produce goods in China […] and have to write ‘made in China’ on them. But it says ‘made in China’ everywhere. What matters is for which country they were produced. There is one quality for Germany and another one for Russia. (Int. 23, D, production and trade of mobile phone technical accessories, male, 40) Apart from regular intensive use of social capital in three different countries, this type of TEA requires frequent confrontation with structural framework (e.g. legal regulations and administrative conventions) in several countries. It also demands various skills and resources in order to quickly and flexibly adapt to changing market conditions. In the above-illustrated example of trade in mobile phone accessories, the respondent had to close his business in 2010 because of the financial crisis in Russia. He was not able to maintain his business mainly because new business partners could not be found for the distribution of his products in Germany or other countries.

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Both respondents had a brokerage position bringing together business partners from their country of origin and a third country. Frequent intensive interactions with actors from business networks in three countries and high investments in maintenance of social capital were essential, and disconnecting from one of the countries could result in the crash of the whole business. Regular communication between the main business partners contributed to building relationships involving trust in the sense of embedded business ties. At the same time, such transnational triadic business networks contained a high proportion of purely price-regulated business relationships (e.g. to manufacturers or retailers) in the sense of arm’s-length ties. Existing pre-migration ties were used to establish business relationships in the country of origin. Different contact paths (e.g. premigration contacts in the country of origin, FSU migrant community in Germany, referral to or direct approach of potential business partners abroad) were used to get access to business networks in the third involved country. Table 12 summarises the main characteristics of different types of TEA identified in the interview data. Table 12: Types of transnational entrepreneurial activities (TEA) Involved countries*

Intensity

Time of first contact

Type I: Intensive TEA with country of origin

GER + FSU

Central strategy

Mainly premigration

Type II: Complementary TEA with country of origin

GER + FSU

Complementary strategy

Mainly premigration

Dominating contact paths** 1, 2, 3

Dominating types of social relationships Strong & weak ties Informal & formal Embedded & arm’s-length

1, 2, 3

Weak ties Informal Embedded business ties

8.5 Types of transnational entrepreneurial activities Involved countries*

Intensity

Time of first contact

Type III: TEA not involving country of origin Type IVa: Multidimensional flexible TEA

GER + OC

Mainly complementary strategy

Mainly post-migration

GER + FSU & GER + OC

Mainly complementary strategy

Type IVb: Triadic TEA

GER + FSU + OC

Mainly central strategy

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Dominating contact paths** 1, 2, 4, 5

Dominating types of social relationships Weak ties Formal Arm’s-length business ties

Mixed

1, 2, 3, 4, 5

Weak ties Informal & formal Embedded& arm’s-length business ties

Mixed

1, 2, 3, 4

Weak ties Informal & formal Embedded & arm’s-length business ties

Table note: * FSU – Successor states of the former Soviet Union (country of origin); GER – Germany (host country); OC – Other countries. ** 1 - direct use of existing transnational pre-migration ties; 2 - direct approaching of transnational businessrelated ties to whom there had been no personal pre-migration contact; 3 - referral to new relevant transnational contacts by existing pre-migration ties abroad; 4 referral to relevant transnational contacts through diasporic nodes (FSU migrant community in Germany and other countries) after migration; 5 - referral to relevant transnational contacts by persons living in Germany outside the FSU migrant community.

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8.6 Examples of business networks involved in TEA The following two examples of businesses engaging in transnational entrepreneurial activities are illustrated using the network maps that were collected during the interview. Car export to Kazakhstan Figure 13 demonstrates the business network of a respondent who was previously involved in intensive TEA with his country of origin (Type II) but after two years moved to complementary TEA (Type I). At time of the interview, the respondent was 38 years old. He moved to Waldbröl with his family as FSU ethnic Germans from Kazakhstan in 1993 when he was 20 years old. The respondent was involved in second-hand car export between 2005 and 2007. At the same time, he was also running a small car repair business in Germany but the main profit was coming from car export. His car repair service in Germany targeted at the mixed market, and he recruited FSU migrants and Turkish migrants. Staff recruitment was facilitated with a combination of his own personal contacts and job announcements. The respondent occasionally hired informal temporary helpers when there was a demand. These informal helpers were usually unemployed persons from his own personal circle, and this was a priceregulated relationship rather than a business relationship involving reciprocity. Three years after his migration to Germany, the respondent went for about one and a half years back to Kazakhstan where he was involved in various informal business activities (see section 8.4). He used the financial resources and social contacts acquired during his temporary return for his later self-employment in Germany. The key three contacts for his car export business were a multiplex relation to a policeman (his father’s friend whom he has known since childhood), a prosecutor, and a customs officer on the Kazakh border to

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whom he was referred by the policeman. The policeman had a brokerage position and was in charge of the overall control of the business situation in Kazakhstan. Figure 13: Business network map of a respondent involved in car export and car repair business

Note: Circles indicate individuals, squares indicate groups of people or organisations.

The respondent was responsible for buying cars in Germany and transporting them to Kazakhstan. Through his connections with the

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authorities, the respondent had privileged access to reliable information which he could strategically use for his business activities: So on New Year’s Eve 2006-2007, the informants from there (Kazakhstan), […] people who are close to the government, told us: ‘Listen, the customs duty will be increased soon [...]’. Before New Year’s Eve we only had 12 cars. We quickly bought everything we could find here (in Germany) within a 200 km radius and sent them there. This was a big amount, about 100 cars. (Int. 53, W, car repair and car export business owner, male, 38) The increasing number of exported cars led to the need for security staff to watch over them on the border before they could be collected by the car dealers. A security company that also took over the customs clearance was hired for this task. This task sharing enabled the respondent to spend less time in Kazakhstan, but some problems started occurring when he was absent for longer periods of time: Everything ran smoothly there for, let’s say, the first eight months. And then they started to steal money. […] To stop this, I sent someone from here (Germany). […] That’s why this person (respondent’s cousin from Germany) went there to watch them, so that we also have a person of trust from our side there. (Int. 53, W, car repair and car export business owner, male, 38 years old) As the respondent was not able to spend longer periods of time in Kazakhstan because he was responsible for car purchases and his car repair business in Germany, not to mention his familial duties, in order to minimise the risks of control loss during his absence, he ‘sent’ his cousin who was also his business partner (multiplex strong tie) to Kazakhstan as a ‘person of trust’ to monitor the situation on the border. After a couple of months, however, the respondent gave

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up the car export business at the end of 2007 due to the economic instabilities in Kazakhstan. He decided to concentrate on his car repair business in Germany as his central business strategy with sporadic involvement in TEA, using them as a complementary business strategy.

Goods transportation service Figure 14 is an example of a business network of a freight forwarding company that transports goods within Germany and across the European Union (Type III – TEA with other countries). The respondent was 58 years old at time of the interview. He migrated to Waldbröl from Tadzhikistan with his family as FSU ethnic Germans in 1989 when he was 26 years old. The respondent was first running a local print shop and got involved in the transportation business at a later time point. He was running the two businesses simultaneously for about 10 years. Because of an illness he gave up selfemployment for two years but started a new transportation business in 2010. His company works with six subcontractor drivers, all of whom are FSU migrants in Germany, who he knew from previous jobs or were recommended to him. In his previous business, the respondent was himself delivering freight to customers all over Europe. In his current business, he was renting seven vehicles to other contractors he was working with, searched for clients and acted as an intermediary between the driving contractors and the customers. The clients are mainly German or European companies that were directly approached by the respondent via special professional business online portals. Over time some of the clients became regular customers.

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Figure 14: Business network map of a respondent involved in goods transporting business

Note: circles indicate individuals, squares indicate groups of people or organisations.

The respondent reported about a negative experience with some of his previous subcontractors that resulted in distrust. Some of the contractors he was previously working with violated customer’s protection ethics by offering their services directly to the respondent’s customers at lower prices to circumvent paying brokerage fees to the respondent. After that, to minimise the risk of opportunism he has become very cautious with hiring new contractors and invested

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in building a relationship based on loyalty and reciprocity with the contractors he was currently working with: For example, the drivers that I support financially (e.g. providing a loan to buy their own vehicle) have an obligation not to betray me. This is their obligation. It is a kind of a little contract between us. They are loyal and I am grateful. (Int. 57, W, transportation service, male, 58) The respondent started his current business with a business partner (FSU migrant, weak tie, professional network) whereby they shared their financial investment for vehicle purchases evenly. This business partner was not actively involved in the ongoing business at the time of the interview because he started a new business, but he was passively involved in the respondent’s business because of his financial investment. At the time of the interview, the respondent was searching for a new business partner in his network of industry. Due to a previous negative experience, the respondent prefers to have contract-based business relationships with actors involved in his business network and to avoid business relationships with family or friends.

8.7 Conclusions The chapter shows that self-employed migrants employ diverse and dynamic transnational entrepreneurial activities. Looking only at transnational entrepreneurship in a narrow sense neglects the role of sporadic transnational involvement for migrant businesses that is more common than regular transnational economic involvement. Intensive TEA as a central business strategy were relatively rare among the interviewed respondents as they were associated with

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certain risks and constraints and most respondents gave them up in favour of less intensive sporadic TEA. In line with the mixed embeddedness approach (Kloosterman & Rath 2001), the findings show that the scope of action for transnational economic activities is not only influenced by migrants’ accessibility to transnational social capital and their individual resources but also by structural frameworks in the respective countries that change over time. In the sense of bounded rationality aiming at optimisation under constraints (Tolciu 2011), sporadic TEA were seen as an alternative economic resource that require less simultaneous embeddedness in the political-economic, institutional and social structures in different countries and that depend less on linking social capital and formal business relationships. By looking at both narrow and broad economic transnationalism, the chapter illustrates that these two categories differ not only with regard to the intensity and frequency of TEA and their importance for the overall business success but also with regard to transnational social capital that is mobilised by migrant entrepreneurs for different types of TEA. It further demonstrates the dynamic character of TEA showing that migrant entrepreneurs can switch between different types of TEA, adapting to the changing market conditions, structural frameworks, and new business opportunities. Although respondents used a variety of channels to mobilise social capital from various networks including transnational ties, they rarely functioned as transnational brokers, directly connecting parts of their networks in different countries with each other if they used TEA as their complementary strategy. Although brokers bridging structural holes are generally associated with privileged positions in the network and with economic benefits (Burt 2001), recent studies show the potential vulnerability of brokers in ethnically diverse environments emphasising the pressure associated with brokerage in competitive settings (e.g. Faist 2014; Barnes et al. 2016).

8.7 Conclusions

281

While most studies on transnational entrepreneurship focus on migrants’ activities between the country of origin and the country of destination, the findings in this chapter demonstrate that TEA can be multipolar. Different types of social capital are mobilised for different types of TEA. Predominantly existing pre-migration weak ties were used for TEA in the country of origin and post-migration weak ties for TEA in third countries. Links to Russian-speaking communities in diasporic nodes outside Germany and professional networks were valuable resources of social capital for TEA in third countries. While informal embedded ties were particularly important if TEA were used as a complementary strategy in the country of origin, TEA only involving third countries were characterised by predominantly formal, price-regulated business relationships. Migrants involved in intensive TEA often relied on pre-migration informal ties in the country of origin in the beginning of their transnational business career but over time tended to formalise their business networks and favoured price-regulated specialised business relationships.

9 Conclusions of the study and outlook Migrant entrepreneurship is typically associated with businesses serving their own migrant community or with low-skilled and labour intense sectors of the mainstream economy. In line with recent studies of migrant businesses (e.g. Desiderio & Salt 2010; Kloosterman 2010; Leicht & Werner 2013; OECD 2010; Rusinovic 2006), this study demonstrates that contemporary migrant entrepreneurship goes beyond these two particular segments, and the self-employed with migration background group increasingly becomes active also in other markets and sectors. The study shows that self-employed migrants employ diverse and dynamic entrepreneurial strategies, and the use of social capital from different networks varies depending on the market where their business operates. Differentiating between different market sectors, for example the migrant market, mixed market, and mainstream market as suggested in this study, can provide nuanced insight on how social capital is used and accessed by migrant entrepreneurs in different market sectors. In line with previous research the study illustrates that ethnic resources are mostly used to reduce transaction costs. Due to restricted access to the mainstream networks, in the sense of bounded rationality and optimisation under constraints (Tolciu 2011), migrants often rely on social capital in their migrant community for staff and client recruitment. Further, co-ownership with relatives and friends minimises opportunism risk while co-ethnic staff and client recruitment via referrals associated with transitive responsibility reduce risks of uncertainty. To quote Waldinger (1995: 561): the ‘embeddedness of economic action in ethnic communities generates social capital because the social connections within those communities help resolve the uncertainties involved in economic exchange’.

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 E. Sommer, Social Capital as a Resource for Migrant Entrepreneurship, https://doi.org/10.1007/978-3-658-29141-9_9

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Business networks of interviewed self-employed in this study were usually a combination of strong and weak ties. In the sense of network complementarity (Uzzi 1999), interviewed migrant business owners strategically combined strong and weak ties that had different functions for their business. Strong ties are usually based on loyalty and reciprocity, and individuals are more likely to support each other if there is a strong bond between them. They are associated with problem solving (Ulhoi 2005). Co-ethnic strong ties were important for all subgroups of entrepreneurs identified in this study, especially in the early stage of business development, as they provided financial support and practical help. In the later stage of business development, interviewed businesses tended to reduce reliance on ties from their personal social circle because they perceived expected loyalty and reciprocity as being contra-productive for their business growth. Co-ethnic weak ties were important for client acquisition, staff recruitment, and generation of business ideas for businesses operating in the migrant market and in the mixed market as well for mainstream market businesses with low entry barriers. They were, however, hardly relevant for high-skilled businesses in the mainstream market. Business-related relationships with co-ethnics were usually embedded ties involving reciprocity and were characterised by a relatively high degree of informality as compared to business-related relationships outside the migrant community. Over time, however, respondents tended to formalise their business networks and favoured price-regulated business relationships. With increasing time spent in the market, they developed formal specialised business relationships by directly approaching potential business-related contacts themselves instead of relying on referrals. Their entrepreneurial experience, market knowledge, and formal contracts served as a guarantee for reliability and trustworthiness. Despite increasing overall formalisation of business networks over time, most respond-

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ents, however, maintained some of the informal relationships because these relationships based on trust and reciprocity provided them with practical help and exchange of information. While horizontal weak ties within the migrant community were relatively easily accessible for respondents, vertical upward social capital within the FSU migrant community was not available to all members of the FSU community to the same extent. Findings from this study question the concept of natural ethnic solidarity, illustrating that ethnic solidarity and reciprocal relations were guided by instrumental motivation based on self-interest and the norm of reciprocity aiming at benefiting the business rather than principled motivation aiming at benefiting the ethnic community in general. Especially in sectors with high competition within the migrant market, established co-ethnic companies were reluctant to provide support for newcomers, and interviewed businesses employed various strategies of getting access to vertical social capital in the migrant community. Business-related relationships outside the migrant community except formal price-regulated contacts to relevant German providers and institutions were hardly relevant for businesses operating in the migrant market. However, several interviewed businesses in the migrant market realised that extending business activities and networks beyond the local migrant market can be beneficial for business growth and planned a ‘break out’ of the migrant market in the future. ‘Breaking out’ to a broader market requires additional investments in social capital as mentioned by all interviewed businesses who started their entrepreneurial career in the migrant market and moved to the mixed or mainstream market at a later time point. Employing staff from host population and getting involved in local sponsoring and volunteering activities was strategically applied to broaden the market extent and to attract host population clients by creating inter-community trust. Embeddedness in heterogeneous

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social networks and strategic transculturalism (Pütz 2004) were especially important for businesses in the mixed market. Network of industry in the receiving country is a common source for business-related ties beyond the migrant community. Especially younger migrants who studied in Germany and migrants with previous employment experience outside the migrant market can benefit from their professional network when they become self-employed. Respondents operating in the knowledge-intensive sectors of the mainstream market usually largely relied on formal business-related ties outside the migrant community that were mostly acquired through their network of industry. Adapting the mixed embeddedness model (Kloosterman & Rath 2001), this study combines resource-oriented and opportunity-oriented perspectives of migrant entrepreneurship extending the model through a transnational perspective. Although social capital plays an important role for transnational economic activities of migrants, there is a research gap in the literature on migrant entrepreneurship regarding the nature and function of social ties involved in different types of transnational economic activities (Sommer & Gamper 2018). This study illustrated the diverse nature of transnational entrepreneurial activities. Sporadic transnational involvement for migrant businesses is more common than regular transnational entrepreneurial involvement. In line with the mixed embeddedness approach (Kloosterman & Rath 2001), the study shows that the scope of action for transnational economic activities is not only influenced by migrants’ accessibility to transnational social capital and their individual resources but also by structural frameworks and politico-institutional context in the respective countries that change over time. While most studies on transnational entrepreneurship focus on migrants’ activities between the country of origin and the country of destination, this study demonstrates that transnational

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entrepreneurial activities can be multipolar and different types of social capital are mobilised for different types of transnational entrepreneurial activities. As it was assumed that local structural context has an impact on entrepreneurial activities of migrants (Rekers & Kempen 2000), the study was conducted in both urban and rural areas. There is a lack of studies looking at migrant entrepreneurship activities in rural areas. This study provides insight on the development of migrant entrepreneurship in a rural area with a relatively high proportion of a particular migrant group. Despite, the relatively high proportion of FSU migrants in the studied rural area, there is no established migrant market with specific functions for the FSU migrant community, and self-employed migrants in this area usually operated in the mixed market that resulted from a close geographic proximity between co-ethnics and the general population. Further, no highskilled businesses could be identified and interviewed for this study in this rural area. That circumstance could be partly due to highskilled migrants preferring to reside in urban areas and partly by difficulties identifying high-skilled migrant businesses outside the migrant market. In the studied urban area, however, there was a wellestablished self-sustained Russian-speaking migrant market. The urban area also provided opportunities for business development in different market sectors and access to heterogeneous networks, especially for high-skilled FSU migrants. Compared to the rural area with a clear dominance of one particular migrant group (FSU ethnic Germans), the FSU migrant community in the urban area was diverse consisting of FSU ethnic Germans, FSU Jewish migrants, and other FSU migrants. Although internal ethnicity (Light et al. 1993) in general is applicable for the diverse subgroups of FSU migrants with regard to their personal networks (Dietz 2000), there was no obvious separation of businesses in the Russian-speaking economy for

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9 Conclusions of the study and outlook

each of the subgroups in the studied urban area, and the FSU migrant market fostered intra-community bridging between different FSU migrant subgroups. This study’s qualitative approach was particularly suitable to explore the access to and dynamics of migrants’ business networks. Throughout the study it became apparent that migrant entrepreneurship should be treated as a dynamic concept. Future research could benefit from integrating the dynamic perspective in the conceptual models of migrant entrepreneurship. It is common for migrant businesses to gradually alter their initial market strategies, and their entrepreneurial networks correspondingly change over time not only with regard to their composition but also with regard to characteristics of dominating business-related social ties. Migrant entrepreneurship research could benefit from representative quantitative studies differentiating between different stages of migrant business development and going beyond rather simplistic differentiation between intra-community boding social capital and extra-community bridging social capital by looking more specifically at functions of strong and weak ties within the migrant community and sources of business-related social capital outside the migrant community (e.g. professional networks, local community activities). Further, differentiation between pre-migration and post-migration ties could be useful for studies analysing the role of social capital for transnational entrepreneurial activities. In addition, studies of migrant entrepreneurship mostly focus on traditional market sectors of migrant business with the recent increase of studies dealing with high-skilled migrant businesses. Studies looking at new markets, for example online trade where the migration background of the business owner is less visible to potential clients, and studies exploring the role of the Internet as a potential source of business-related social capital (e.g. social media and professional online portals) for migrant businesses could provide new insights on contemporary migrant entrepreneurship.

9 Conclusions of the study and outlook

289

Some limitations of the study need critical consideration. First, the study is not representative and the findings can therefore not be generalised to the whole population of FSU migrant entrepreneurs in Germany. Second, it was not possible to integrate network maps in all interviews and systematic analysis of structural network characteristics (e.g. size, density) is therefore missing from the study. Furthermore, network maps are a relatively static approach depicting the respondent’s network at a certain time point. More advanced network data collection approaches or longitudinal studies reflecting dynamics in the business networks would allow a more thorough analysis of networking strategies and their change over time. While the present study primarily focuses on the content of networks, further research applying mixed-method approaches that combine narrative data with structural network data analysis (e.g. Bilecen 2016; Herz et al. 2015) could provide deeper insights into the role of network structures for migrants’ businesses. Third, this study takes the politico-institutional context into account only in a loose way. A stronger integration of the macro context as suggested by the mixed embeddedness model would benefit future research.

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Appendix A: Interview guide

Not all questions apply to all respondents. Question formulation and question order can be changed depending on what has been previously told by the respondent. For formerly self-employed, questions should refer to previous self-employment and an additional question asking about the reasons of business failure or giving up self-employment should be added at the end of Section B if not already mentioned. Start of the interview: I am interested in your personal self-employment story. How did this come about? What did you do before that? How did your business develop over time? What are the things you consider important in relation to your self-employment? I will not interrupt you at first but I will take some notes so that I can revisit some of the things you mentioned. A. Previous employment, education, and experience with German labour market 

What education degree do you have? What is the profession you learned?



In which country did you obtain your first professional degree? If not in Germany, was it formally recognised in Germany?



In which profession have you mainly worked in your country of origin?

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 E. Sommer, Social Capital as a Resource for Migrant Entrepreneurship, https://doi.org/10.1007/978-3-658-29141-9

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

Have you completed any additional apprenticeship after your arrival in Germany? If yes, was it was important for your current self-employment?



Please tell me about your experience in the German labour market. In which job have you worked before you became self-employed? Have you ever been unemployed in Germany? If yes, for how long? What were you doing in the last year before becoming self-employed?



What was your motivation to become self-employed?



Why did you decide to become self-employed in this particular sector?



Have you already been self-employed in a different business before starting this business? If yes, in which sector? Why did you decide to give up this previous self-employment?



Have you ever been self-employed in your country of origin before moving to Germany? If yes, in which sector?



Have you been previously self-employed in a different business in Germany? If yes, could you please tell more about it?

B. Business structure & strategy 

Since when are you self-employed (reference to the current self-employment)?



Did you start this business yourself or did you take over this business from someone else?



Do you use business premises for your company? If yes, how did you find these premises?



How did you prepare yourself for self-employment?



Were there any difficulties in the start-up phase? Has anyone assisted you with business formation? Did you receive

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325

any support in the start-up phase? If yes, from whom and in what way? 

Was financial start-up capital necessary for the business formation? If yes, how did you get the financial start-up capital?



Are there other co-owners in your company? If yes, how many and from which country are they from? Are there any relatives or friends among your co-owners?



Do you have employees? If yes, how many? Where, how, and according to which criteria are you searching for employees? How many of your employees are immigrants from the former Soviet Union? Are there any relatives or friends among your employees? If yes, how many?



Please describe the composition of your clientele. Who is the target client group? What is the origin of most of your customers? How do you search for customers?



How and where do you advertise your business?



Are you cooperating with other companies, self-employed persons, or any organisations? If yes, in what form?



Are there any difficulties in your business currently? Whom do you usually contact if you have any problems in your business or need advice?



Is anyone currently supporting you with running your business? If yes, who and in what form?



How has your business changed since its formation?



What developments of your business do you expect in the future?



Have your expectations regarding self-employment been fulfilled?

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C. Urban vs. rural area 

How long have you been living in this place? Have you ever changed your place of residence after moving to Germany? If yes, where did you live in the past?



What was the main reason why you decided to settle [in the countryside/ in a city]?



What are the advantages and disadvantages of your current place of residence for your self-employment?



In your opinion, what would have been different had you become self-employed [in the countryside/ in a city]?

D. Self-employment network 

How did you search and find important contacts for your business?



Was it easy or rather difficult for you to make the relevant contacts for your self-employment? Why was that? Did you have a specific strategy for that or was it not necessary?



Have you ever supported anyone in founding or running a business? In what way?



Have you ever linked people together who previously did not know each other and now cooperate? If yes, could you please give me one or two examples?



Do you think that people in your self-employment network are expecting something in return for their support? If yes, could you please give me one or two examples?



Have you experienced conflict or stress situations with or between the important actors in your business network? If so, could you give me some examples? What were the reasons for that? How were problems solved?

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327

E. Private social environment and transnational contacts 

If you think of your private circle of friends in Germany, is it mostly migrants from the former Soviet Union, native people, other people, or mixed? Please tell a little bit about it. Did you first meet these people in Germany?



Was it difficult for you to make private contacts when you came to Germany? Where and how did you meet most people?



Do you still have many contacts in your country of origin? Who are these contacts and how often do you get in touch? Do they have any function for your business?

F. Network map exercise I would like to ask you a few questions about your self-employment social network. In this part of the interview we will work with a questionnaire for a better overview. I will try to draw your network on a sheet of paper. Could you please tell me the names or initials of those who are important for your self-employment? You do not need to use real names. You can use initials or nicknames. The only thing that matters is that you know which person is meant under which abbreviation or pseudonym. These can be different people or organisations that are important for your self-employment, for example, people who are relevant to organisational processes of your business, or people and institutions that provide you with practical help or important information, as well as people who have an advisory role, business partners, or customers.

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Appendix A: Interview guide

Instructions:  Enter the names/abbreviations in the circle and then number the persons. Then ask where the respondent knows these people from, how did the contact with them come about, and what function each of them has for the respondent’s business. 

How are actors interconnected? Put the names from the circle into the relationship matrix (horizontal and vertical, pay attention to the numbering) and ask for connections between actors in the network.



Fill in the name interpreter table for each network actor.

G. Demographic questions 

In which year did you arrive in Germany?



From which country did you move to Germany? Before moving to Germany, have you lived predominantly in an urban or a rural area in your country of origin?



How old are you?



Which country citizenship do you have?



To which of the following groups of Former Soviet Migrants do you belong: ethnic Germans, Jewish migrants, or other migrants. In case of ‘other migrants’, please specify migration status.

Appendix B: Network map data collection instrument

Name generator Could you please tell me the names or initials of those who are important for your self-employment? You do not need to use real names. You can use initials or nicknames. The only thing that matters is that you know which person is meant under which abbreviation or pseudonym. These can be different people or organisations that are important for your self-employment, for example, people who are relevant to organisational processes of your business, or people and institutions that provide you with practical help or important information, as well as people who have an advisory role, business partners, or customers. Put name/initials in the circle (separate paper sheet)

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 E. Sommer, Social Capital as a Resource for Migrant Entrepreneurship, https://doi.org/10.1007/978-3-658-29141-9

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Appendix B: Network map data collection instrument

Name interpreters Where is this actor based? Name/ Initials

Gender

Age

Germany, same region

Germany, different region

Other country (which?)

Which background does the actor have? Name/ Initials

FSU migrant

Native

Other migrant

Other person abroad

Name/

To which of the following groups

Initials

does the actor belong? Family & relatives

Close friends

Acquaintances

Businessonly contacts

Profession

How long have you known this actor?

Appendix B: Network map data collection instrument

331

Which of these functions does this actor have for your business? Name/ Initials

Support startup stage

Support with tax, law, bookkeeping

Relationship matrix

Information exchange

Business coowner

Client

FinanPraccial tical suphelp port

Other function (specify)