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More Immigrants Launch Their Businesses in Technological and Knowledge-Intensive Sectors

A recent study of the Center for SME Research and Entrepreneurship (ifm) at the University of Mannheim has found that, in Germany, there is an increase of business founders with a migrant background. Their businesses are mainly founded in technology and knowledge-intensive sectors.

New companies stimulate economic renewal and change, but even before the pandemic, there has been a continual decline in business foundations in Germany. In recent years, immigrants have emerged as Germany's hope with regard to its economic policy. The number of self-employed persons with a migrant background has been growing constantly as well as the migrants’ contribution to innovation, employment, and international expansion of middle-sized companies.

These are just some among other findings that the researchers for entrepreneurship and migration Dr. René Leicht, Ralf Philipp and Prof. Dr. Michael Woywode at the Center for SME Research and Entrepreneurship (ifm) of the University of Mannheim emphasize in an expert’s report, which they have published on behalf of the German federal government.

The number of self-employed immigrants has increased by 50 percent
The study, which was conducted by the researchers in Mannheim, shows that the number of self-employed immigrants has increased by more than 250,000 to a total number of 791,000 (+50 percent) while the number of self-employed persons with a German background has decreased to a total number of 360,000 (-10 percent). By now, one in five founders (20 percent) in Germany has a migration background. Around 90 percent of these entrepreneurs are so-called in persona immigrants, meaning that they are immigrants of the first generation.

More and more business foundations in technological and knowledge-based sectors
In contrast to the “generation of guest workers”, recently immigrated entrepreneurs hold higher qualifications. Thus, unlike previous cohorts, they do not launch their businesses in trade or the food service industry, but more often in sectors which promote knowledge and modern technologies. By now, one in four migrant businesses is in the sector of knowledge-intensive services.

Strong export business thanks to international relations
One outstanding strength of migrant businesses lies in the international relations and networks that immigrant entrepreneurs can use because they have the advantage of knowing another language and possessing specific knowledge of another country. While 9 percent of startups with a German background report export activities, 14 percent of the immigrant startups report such activities.

Immigrant businesses create multiple job opportunities and vocational training positions
Another remarkable aspect is the employment contribution of businesses founded by immigrants. In a conservative estimate, they provide at least 3.4 million jobs. The growing migrant businesses are increasingly looking for skilled professionals, which is why they have been focusing more on in-company vocational training than before. The vocational training rate or rather the proportion of trainees related to the total number of employees is now slightly higher in businesses run by migrants as compared to businesses owned by entrepreneurs with a German background.

Legal and bureaucratic obstacles remain difficult to overcome
However, the expert's report by the ifm also reveals that the immigrants’ potential to launch new businesses is far from being exhausted, especially as they encounter many legal and bureaucratic obstacles on their way to self-employment. According to the researchers, it is necessary to change the immigration policy not only with respect to the recruitment of professionals in German companies, but also regarding the immigration of people who want to launch a business in Germany.

You can access the study on the German website of the Center for SME Research and Entrepreneurship here: