Hope for migrant companies

ifm at the University of Mannheim advises the German government with expertise on migrant companies

New companies are fuelling economic renewal and change, but start-up activity in Germany has steadily declined – even before the pandemic. In this situation, immigrants are becoming the beacon of hope for economic policy. This is because the number of self-employed people with foreign roots has risen steadily in recent years, as has their contribution to innovation, employment and the internationalisation of SMEs. These are just some of the findings to which start-up and migration researchers René Leicht, Ralf Philipp and Michael Woywode from the Institute for SME Research at the University of Mannheim refer in an expert report they prepared on behalf of the German government. The growing “migrant economy” is one of many topics currently being discussed in the “Expert Commission on Integration Capability”.

The study from Mannheim shows that the number of self-employed people with a migrant background increased by more than half, or by over a quarter of a million, to 791,000 between 2005 and 2019, while the number of self-employed people of German origin fell by 360,000 (-10%). Today, one in five (20%) entrepreneurs in Germany has a migrant background. Around 90% of these self-employed people are immigrants. Unlike the “guest worker generation”, recent immigrants have higher qualifications. As a result, they are less likely than previous cohorts to set up businesses in the catering and retail sectors, and are now increasingly setting up businesses in sectors where knowledge and modern technologies are important. One in four migrant companies is now in the knowledge-intensive services sector, which includes technology-orientated start-ups, engineering firms and research laboratories as well as the liberal professions (from tax consultants to doctors and cultural workers). An outstanding strength of migrant companies is their international relationships and networks, which they can utilise better than locals thanks to their language and other country-specific knowledge. While 9% of start-ups by people of German origin have export activities, this figure is already 14% among migrant start-ups.

The contribution made by companies employing immigrants is also remarkable: conservatively estimated, they provide at least 3.4 million jobs. Excluding jobs in corporations, one in six employees now has a boss with foreign roots. The growing migrant companies are also increasingly looking for skilled labour, which is why they are now more involved in in-company training than before. The proportion of trainees and apprentices among all employees in companies run by migrants is now even slightly higher than in companies with owners of German origin.

Overall, however, the ifm Mannheim's expertise also shows that the start-up potential of immigrants is far from exhausted, especially as their access to self-employment is hampered by many legal and bureaucratic hurdles. From a scientific point of view, new initiatives are therefore needed to give new impetus to start-up counselling and support that is still not very widespread. To this end, previous experiences and concepts must be systematically compiled, evaluated and passed back to the advice centres or passed on to politicians and project sponsors. 

However, the researchers also believe that a change in immigration policy is necessary, which not only focuses on recruiting skilled labour for German companies, but also on the immigration of people who want to set up a company in Germany themselves.

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