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JOHANNES KEPLER
UNIVERSITY LINZ
Altenberger Straße 69
4040 Linz, Austria
jku.at
Author
Jennifer Quoc BA
Submission
Institute of Innovation
Management
Thesis Supervisor
Univ.-Prof. Dr. Matthias
Fink
October 2020
REFUGEE
ENTREPRENEURSHIP:
EFFECTS OF
EMBEDDEDNESS AND
SOCIAL CAPITAL ON
ENTREPRENEURIAL
INTENTION
Master’s Thesis
to confer the academic degree of
Master of Science
in the Master’s Program
General Management
2
SWORN DECLARATION
I hereby declare under oath that the submitted Master’s Thesis has been written solely by me
without any third-party assistance, information other than provided sources or aids have not been
used and those used have been fully documented. Sources for literal, paraphrased and cited
quotes have been accurately credited.
The submitted document here present is identical to the electronically submitted text document.
Linz, 27.10.2020
Jennifer Quoc
3
Table of Content
Executive Summary .......................................................................................................................... 5
1. Introduction ............................................................................................................................... 6
2. Definition .................................................................................................................................. 8
2.1. Definition “Refugee” ......................................................................................................... 8
2.2. Definition “Migrant” ......................................................................................................... 8
3. Refugee Entrepreneurship ......................................................................................................... 9
3.1. Refugee Entrepreneurship vs Immigrant Entrepreneurship .............................................. 9
3.2. Refugee’s motivation and intention for creating a business ............................................ 10
4. Mixed Embeddedness Approach ............................................................................................. 12
4.1. Embeddedness ................................................................................................................. 12
4.2. Mixed Embeddedness ...................................................................................................... 13
4.2.1. Institutional embeddedness .................................................................................. 13
4.2.2. Social embeddedness ............................................................................................ 14
4.3. Mixed embeddedness and refugee entrepreneurship ....................................................... 16
4.3.1. Institutional embeddedness .................................................................................. 16
4.3.2. Social embeddedness ............................................................................................ 17
4.3.3. Difficulties and lack of embeddedness ................................................................. 18
5. Social Capital Theory .............................................................................................................. 21
5.1. Definition of Social Capital ............................................................................................. 21
5.2. Social capital and refugee entrepreneurship .................................................................... 24
5.2.1. Bonding and bridging social capital ..................................................................... 24
5.2.2. Integration ............................................................................................................ 24
5.2.3. Self-employment and entrepreneurship ............................................................... 25
6. Empirical study ....................................................................................................................... 27
6.1. Data collection ................................................................................................................. 27
6.2. Findings & results ............................................................................................................ 27
7. Conclusion and future outlook ................................................................................................ 33
8. References ............................................................................................................................... 34
4
List of Table
Table 1: Correlation analysis of the survey data ............................................................................ 29
5
Executive Summary
In 2015 Europe had to face a huge refugee crisis which is still ongoing. With the increase of
immigration, the situations in European countries are tense, as many countries are hesitating
whether they should accept refugees or not. The main immigrant groups are from Afghanistan,
Syria and Venezuela. According to UNHCR, Austria had 135,955 refugees at the end of 2019 and
Sweden accepted 253,794 refugees (UNHCR, n.d.–a).
Certainly, these refugees face challenges such as the integration into the host society and
overcoming their tragic past. Due to discrimination against ethnic minorities in the host country,
refugees have low chances in finding a decent job. Thus, self-employment is seen as the
opportunity for economic survival and escape from poverty.
For refugees mixed embeddedness and social capital are relevant for their integration and most
importantly for becoming a successful entrepreneur. Mixed embeddedness connects the migrants’
skills and resources such as human and social capital with the opportunity structure in the host
country. Someone’s entrepreneurial activities are affected by the embeddedness in the local
business.
Social capital is relevant in refugee entrepreneurship, as solidarity and trust facilitate cooperation
and support. Furthermore, through social networks refugee entrepreneurs have access to
information necessary for a successful business. Moreover, social capital is another resource that
it shared in social groups and networks. This topic has gained more attention in immigrant
entrepreneurship research, as social networks are critical for entrepreneurial success. In theory,
integration into the host society plays an important role.
Through this collaborative study of the Johannes Kepler University in Linz Austria and the Lund
University School of Economics and Management in Lund, Sweden, the impact of mixed
embeddedness and social capital on the entrepreneurial intention of Afghan and Syrian refugees
in either Austria or Sweden were investigated. The result shows a different picture than it was
expected from the theoretical research. According to the observations, the skills and competences
are the most important factors for refugee entrepreneurs, although social capital and social
embeddedness are still crucial for a successful business start-up.
6
1. Introduction
A huge refugee crisis hit Europe in 2015. Hundred thousand of people had to flee from their
home country across the Mediterranean Sea to escape from war and persecution (Spindler, 2015).
There are currently 26 million refugees world-wide and about 68% came from Syria (6,6
million), Venezuela (3,7 million), Afghanistan (2,7 million), South Sudan (2,2 million) and
Myanmar (1,1 million) (UNHCR, 2020).
Sweden had a peak of immigration in 2015-2016. For the following five years, their refugees
mainly come from Syria. In 2019, the largest immigration group were Swedes who returned to
their home country. This group was followed by Indian and Afghan refugees. In 2019 only 5% of
the immigrants came from Syria (Sweden.se, n.d.).
According to UNHCR, Austria had 135,955 refugees at the end of 2019 and Sweden had
253,794. These are the number of refugees that are recognized according to the 1951 convention
relating to the Status of Refugees, its 1967 Protocol, the 1969 Organization of African Unity
Convention Governing the Specific Aspects of Refugee Problems in Africa and the 1984
Cartagena Declaration on Refugees in accordance with the UNHCR Statute (UNHCR, n.d.–a).
There has been a lot of discussions about whether refugees should be allowed to come to the host
country. People think of negative points such as unemployment, crime rates, potential inflation
and government expenditure, when the word “refugee” is mentioned. However, there has been an
increase of studies that highlight the advantages for accepting refugees in the host country. An
example would be that refugee entrepreneurship might be able to boost the economy in the host
country (Bizri, 2017; Shneikat & Alrawadieh, 2019). However, there are some obstacles refugees
have to overcome. Discrimination against ethnic minorities, legal restrictions for entering the job
market as well as knowledge and skills that are not existing or not acknowledged are some of the
difficulties they have to face. Due to these factors, it is quite tough for refugees to find a decent
and well-paid job. Therefore, they consider self-employment as an opportunity (Baycan-Levent
& Nijkamp, 2009; Bizri, 2017).
With the increase of refugees and their low chance of finding a job, there might be a high number
of refugees who consider entrepreneurship as their escape from poverty and a chance for their
economic survival. Furthermore, studies have shown that embeddedness and social capital play
important roles in the success of a refugee entrepreneur (Bizri, 2017) .
7
Thus, this thesis is about the entrepreneurial intention of Afghan and Syrian refugees in Austria
and Sweden, with the focus on to what extent mixed embeddedness and social capital influence
their decision for self-employment.
This thesis is part of a collaborative study of the Johannes Kepler University in Linz Austria and
the Lund University School of Economics and Management in Lund, Sweden. The goal of this
collaborative study is to analyse the entrepreneurial intention of refugees who are currently living
in either Austria or Sweden. This study is planned to consist of four waves. The first wave of the
data collection happened in summer-autumn 2019.
For this thesis, the data from the second wave of data collection performed in spring and summer
2020 is used. The target group included immigrants and refugees between the age of 18 and 35
years who came from either Afghanistan or Syria.
Structure of the thesis
The thesis is split into two big chapters. The first one gives a literature framework and the second
one focuses on the empirical study. Firstly, the difference between refugee and migrants will be
defined, which is then followed by the definition of refugee entrepreneurship. Furthermore,
mixed embeddedness and social capital will also be explained. After defining both theories, their
link with refugee entrepreneurship will be discussed. The focus is on how these theories affect
and appear in refugee entrepreneurship. The empirical study was done in collaboration with the
University in Lund, Sweden. The data will be analysed and discussed in the final chapter. Lastly,
the conclusion and future outlook of this research will be presented.
8
2. Definition
There is a distinction from the term “migrant” and “refugee”. Thus, in this chapter the definitions
of both terms as well as the term “immigrant” will be explained and defined.
2.1. Definition “Refugee”
There are many different definitions and understandings of the term “refugee”. However, many
states follow the definition stated by the United Nations (UN) Convention (Shacknove, 1985).
The international legal definition of “refugees” by United Nations High Commissioners for
Refugee (UNHCR) was mentioned in the United Nations 1951 Convention on the Status of
Refugees. The 1951 Refugee Convention is a key legal document and defines a refugee as
“someone who is unable or unwilling to return to their country of origin owing to a well-founded
fear of being persecuted for reasons of race, religion, nationality, membership of a particular
social group, or political opinion”. When the person fulfills these criteria, he or she receives the
refugee status (UNHCR, n.d.–b).
In short, a refugee is a person who has to flee from life-threatening danger. In this thesis, this
definition is used for the term “refugee”.
2.2. Definition “Migrant”
Refugees are entitled to rights as specified by international law. However, in the case of migrants,
they have to follow the immigration laws. These immigration laws are defined by each country
which accepts the migrants. Migrants are people who leave their own countries to pursue better
economic opportunities in another country (Bizri, 2017). Another widely used definition is that a
migrant is someone who has been living outside of his or her country of birth or citizenship for
over a period 12 months or longer (Baycan-Levent & Nijkamp, 2009).
9
3. Refugee Entrepreneurship
This chapter is about refugee entrepreneurship. Firstly, there will be a distinction between refugee
and immigrant entrepreneurship, as it is important to understand the different aspects. This will
then be followed by the subchapter about the motivations and intentions of refugees to start their
own business.
3.1. Refugee Entrepreneurship vs Immigrant Entrepreneurship
There are observations and difficulties for both immigrants and refugees. However, it is still
necessary to highlight that immigrants and refugees are two different groups. Refugees may have
entrepreneurial characteristics which are distinct from immigrants (Wauters & Lambrecht, 2008).
Forced immigrants such as refugees and economic immigrants who seek for entrepreneurial
opportunities in another country have different entrepreneurial attributes (Shneikat &
Alrawadieh, 2019).
One relevant definition is that migrant and immigrant entrepreneurs arrive in a country and start a
business for the purpose of economic survival. However, in the case of immigrants there are
many other attributes that need to be considered. It is much more complex, as they combine
distinct, cognitive, affective, behavioural and social characteristics. As mentioned, international
law specifies the rights of the refugees, whereas migrants have to follow the immigration of the
host country (Bizri, 2017).
There are some examples of differences between refugees and immigrants that have
consequences for creating and managing a business:
• In comparison to immigrants, refugees have a less extensive social network. A reason is
that refugees flee from their own country on an individual basis. Moreover, refugees also
come from different countries.
• Refugees are not able to make preparations before they leave their home country, as they
are forced to leave at an unpredictable time. Moreover, they do not have the possibility to
return their home country to acquire funds, capital or labour force, which are needed for
establishing a business.
• The next point are the traumatic incidents that they had to deal with in their own country
and also during their flight. These kinds of experiences have a tremendous impact on their
psychological health and can certainly cause future problems.
10
• As it has been mentioned, refugees are forced to flee at an unforeseeable time, they do not
have time to prepare themselves. They have to leave their valuable things behind in their
home country. Thus, this also leads to the problem that refugees often do not have any
documents, certificates of education, diplomas and financial capital, when they arrive in
the host country.
When the refugees arrive in the host country, they are not suited for paid labour. This also applies
to refugees who have the qualifications and skills needed (Wauters & Lambrecht, 2008) .These
differences affect the functioning of entrepreneurship and therefore, it is necessary to distinguish
immigrant entrepreneurship from refugee entrepreneurship. In general, refugees have to deal with
more problems in comparison to immigrants (Wauters & Lambrecht, 2006).
3.2. Refugee’s motivation and intention for creating a business
Motivational factors for starting a business are survival, desire for independence, availability of
resources and limited access to the labour market (Shneikat & Alrawadieh, 2019).
Firstly, survival is definitely the reason that pushes refugees to self-employment. Refugees and
immigrants have to face many difficulties on the labour market. Discrimination and the lack of
knowledge and skills makes it very difficult for them to find a job (Wauters & Lambrecht, 2006).
Therefore, they have to look for another possibility to earn some income, which turns out to be
self-employment. For them this is the only way to their economic survival and to get out of
poverty (Baycan-Levent & Nijkamp, 2009; Bizri, 2017).
The second reason is part of the first one, as it is about availability and accessibility to resources.
Being able to gain resources is a factor that encourages refugee entrepreneurship. Having the
experience, knowledge and financial capital play an important role in their decision to start a
business. (Baycan-Levent & Nijkamp, 2009; Shneikat & Alrawadieh, 2019).
Another reason for self-employment is that refugees want to get out of unemployment, because
they experience difficulties in accessing the labour market and thus, start their own business to
survive (Wauters & Lambrecht, 2006). They suffer from disadvantages on the labour market, as
they only have limited language proficiency and ill-defined legal status. They are less likely to
find a job. Furthermore, they often suffer from exploitation and unfavourable working conditions
as well (Shneikat & Alrawadieh, 2019).
11
Refugees have the desire to be independent and be able to work freely for themselves without
having the obligations to follow orders from someone. Furthermore, apart from independence,
there is also the desire for growth, which can be an existing business or climbing up the career
ladder. They would like to find better job opportunities and avoid low-paid jobs. These are also
factors that motivate refugees to become self-employed (Fong et al., 2007).
Another reason for establishing their own business is integration. Refugees believe that self-
employment helps them to integrate into the host society quicker. Self-employment might help
them to integrate and adapt themselves better to their “new life” in the host country. They get
some kind of comfort and empowerment. The feeling of better integration also leads to better
mental health and well-being (Fong et al., 2007).
There are many refugees that cluster together and form networks with other individuals from the
same background. In these networks they generate and exchange entrepreneurial ideas. Such
social networks are considered valuable assets, because through them they have access to power,
information, knowledge and capital. Furthermore, such social networks also help them to have
access to other networks. Having a great social network can lead to stronger business
relationships and increased trade. (Bizri, 2017) . Later in this thesis the topic of social networks
will be addressed again.
When refugees plan to establish their own business, they also have their future generation in
mind, as they want to provide their children a secure future, especially a financially secure future.
They do not want their children to go through all the struggles which they had to in their past.
Many have the hope to hand over their successful business to the next generation (Fong et al.,
2007).
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4. Mixed Embeddedness Approach
In this chapter the concept of embeddedness by Mark Sanford Granovetter and Karl Polanyi and
the mixed embeddedness approach by Robert Kloosterman, Joanne van der Leun & Jan Rath are
explained.
4.1. Embeddedness
The concept of embeddedness is nothing new. Granovetter (1985) introduced this term with the
attempt to capture a middle ground between economic theory that under-socialises behaviour, and
much of the existing sociological theory that over-socialises behaviour. In his opinion economic
rationality must always be considered as embedded within social relationship (Granovetter,
1985).
Besides Granovetter, Polanyi was also one of the first ones to do some research on the concept of
embeddedness. Polanyi defined the concept of embeddedness as something that “explicitly
intended to undermine incipient disciplinary boundaries by presenting social processes in terms
of a mix of economic and non-economic factors (Krippner et al., 2004, p. 111)”. Furthermore,
Polanyi stated that “instead of economy being embedded in social relations, social relations are
embedded in the economic system” (Gemici, 2008, p. 25). An additional argument of Polanyi is
that “in non-market societies economic activities are embedded in non-economic kinship,
religious and political institutions”. However, in market societies economic activities are not
embedded in the society, as they are for rationalization (Langevang et al., 2015).
A market is a space where two parties meet and exchange by buying and selling (Polanyi, 1944).
Polanyi distinguished between two societies, the market societies and pre-market societies.
Market societies operate through the supply and demand mechanism with contracting, while pre-
market societies operate through status in determining social position and income. The status and
the contracts suggest how the economic life and the organization in a given society should be
(Gemici, 2008).
Overall, embeddedness is defined as “the nature, depth and extent of an individual’s ties into the
environment” (Jack & Anderson, 2002, p. 2). Embeddedness is an important concept which
explains the success of entrepreneurs and, in particular, of immigrants (Kloosterman et al., 1999).
13
4.2. Mixed Embeddedness
Mixed embeddedness was developed in relation to immigrant entrepreneurs. The main point was
to show in which informal and formal institutional contexts the entrepreneurs are embedded
(Langevang et al., 2015). The approach was later introduced by Kloosterman, Van der Leun and
Rath in the 1990s. Back then the concept of mixed embeddedness was mainly used in a one-sided
way, as it refers almost exclusively to the social characteristics of groups. This neglects the wider
economic and institutional context in which immigrants are naturally embedded in (Kloosterman
et al., 1999).
The beginning of this approach was a matching process between human and social capital and the
opportunity structure. Human and social capital consist of skills, knowledge and resources.
Furthermore, the opportunity structure is defined by the conditions of the business location.
Kloosterman, Van der Leun and Rath referred to the distinct concepts of embeddedness by
Granovetter and by Polanyi. They used this conception in relation to social networks and place-
bounded institutions. This concept shows that all entrepreneurial activities are affected by the
migrants’ embeddedness in the structure of the business location. The structure includes aspects
such as laws, rules and market characteristics. Moreover, at the same time these migrant
entrepreneurs are socially embedded as well (Barberis & Solano, 2018).
Thus, according to the idea of mixed embeddedness, entrepreneurs are embedded in two ways.
One way is in the social networks, which is the structural embeddedness and in the formal
opportunity structure, which is the political and regulatory embeddedness.
To sum it up, mixed embeddedness in migrant entrepreneurship means that the entrepreneurs are
socio-institutionally embedded (Storti, 2018).
In the following institutional embeddedness, which covers the political and regulatory
embeddedness, and social embeddedness defined by Kloosterman (2010) will be explained in
further details.
4.2.1. Institutional embeddedness
Mixed embeddedness was developed in relation to immigrant entrepreneurs. The main point was
to show in which informal and formal institutional contexts the entrepreneurs are embedded
(Langevang et al., 2015). The approach was later introduced by Kloosterman, Van der Leun and
Rath in the 1990s. Back then the concept of mixed embeddedness was mainly used in a one-sided
14
way, as it refers almost exclusively to the social characteristics of groups. This neglects the wider
economic and institutional context in which immigrants are naturally embedded in (Kloosterman
et al., 1999).
The beginning of this approach was a matching process between human and social capital and the
opportunity structure. Human and social capital consist of skills, knowledge and resources.
Furthermore, the opportunity structure is defined by the conditions of the business location.
Kloosterman, Van der Leun and Rath referred to the distinct concepts of embeddedness by
Granovetter and by Polanyi. They used this conception in relation to social networks and place-
bounded institutions. This concept shows that all entrepreneurial activities are affected by the
migrants’ embeddedness in the structure of the business location. The structure includes aspects
such as laws, rules and market characteristics. Moreover, at the same time these migrant
entrepreneurs are socially embedded as well (Barberis & Solano, 2018).
Thus, according to the idea of mixed embeddedness, entrepreneurs are embedded in two ways.
One way is in the social networks, which is the structural embeddedness and in the formal
opportunity structure, which is the political and regulatory embeddedness.
To sum it up, mixed embeddedness in migrant entrepreneurship means that the entrepreneurs are
socio-institutionally embedded (Storti, 2018).
In the following institutional embeddedness, which covers the political and regulatory
embeddedness, and social embeddedness defined by Kloosterman (2010) will be explained in
further details.
4.2.2. Social embeddedness
According to Kloosterman social embeddedness is a “widespread and very fruitful approach to
entrepreneurship” (Kloosterman, 2010, p. 27). It is not only referred to general entrepreneurs, but
particularly to immigrant entrepreneurs. Social embeddedness means that someone is embedded
in networks (Kloosterman, 2010). In entrepreneurship social embeddedness is important, as it is
the first essential step to creating a business. However, social embeddedness does not only mean
to establish social relationships. There are many aspects that have to be taken into account. These
are for example understanding the nature of the structure, enacting or reenacting this structure
which creates new social ties and holds both the link and the structure. While taking into these
15
aspects into account, entrepreneurs will develop credibility and gain knowledge of how a
company should be operated (Jack & Anderson, 2002).
Social embeddedness provides access to hidden and imperceptible resources, which would have
not been accessible to the entrepreneur. As there will be more resources available to the
entrepreneurs, it can facilitate the recognition of the most necessary social resources. Moreover,
the better one is embedded within the social context, the more access and support the
entrepreneur will receive during the business process and for the entrepreneurial activities. Social
embeddedness supports the entrepreneur in understanding the distinct characteristics of the local
structure and in achieving positive entrepreneurial results (Jack & Anderson, 2002). Granovetter
explains that relational and social embeddedness refers to “economic actors” and involves
personal social relationships. That means that entrepreneurs are embedded in strong social
networks consisting of customers, suppliers, competitors and law enforcers, whereas structural
embeddedness takes a look on broader networks to which these “economic actors” belong
(Kloosterman, 2010).
Graduate entrepreneurs Mwasalwiba, Dahles and Wakee propose that social embeddedness does
not simply strengthen or weaken entrepreneurship, but that it implies “complex, partly
converging and partly conflicting institutional forces at work which at the same time advance and
impede entrepreneurial activities” (Langevang et al., 2015).
Kloosterman (2010) used an example about a Kurdish immigrant from Turkey, who moved to the
Netherlands. While taking over a bicycle repair shop, he found new opportunities for the
company. Although he lacked financial capital, he was still able to become successful by relying
on the social capital. This confirms that social embeddedness plays a very important part in one’s
business, not only in the case of immigrants and refugees. The entrepreneur benefitted from
having close and strong social relations and family ties. His social relations supported his
business by providing the needed resources. However, as there are so many people that got
involved with the business, they also have an influence on the direction the company goes. The
actions and the goals of the company will probably be affected by all these parties involved,
especially when the social relations are tight. In this case the focus of this company would
otherwise not be on profit maximizing. Apart from the strong and close social relations, the local
consumer market should not be forgotten. Certainly, businesses do not operate by only having
resources. There has to be a consumer market, where the products and services can be offered.
Refugee entrepreneurs have to look for markets which are open to new entrants. Otherwise, it
will not be possible for them to establish their business there. Moreover, the market should have
16
low economic and also institutional barriers such as local laws and regulations (Kloosterman,
2010).
The barrier and difficulties of mixed embeddedness for refugees will be discussed later in this
thesis in further details, as there are many that refugees have to face with.
Although being well-embedded can lead to positive outcomes, it can also be a constraint. There
might be the case where embeddedness turns into a liability. That might occur for example when
an important player of the social networks quits unexpectedly, or institutional forces rationalise
market. Moreover, there might also be a case of over-embeddedness. Over-embeddedness might
occur when social networks overrule the economic imperatives of the company.
To sum it up, social embeddedness supports entrepreneurs in understanding the local structure
and encourages them to also become a part of the structure. Then a relationship is formed. The
structure does not empower, but it offers additional entrepreneurial opportunities to the
entrepreneur. However, there are certainly some negative aspects such as over-embeddedness,
changes in the economy and betrayal that can affect the entrepreneur (Jack & Anderson, 2002).
4.3. Mixed embeddedness and refugee entrepreneurship
Previously, the mixed embeddedness approach was explained by distinguishing two kinds of
embeddedness. These are institutional and social embeddedness. Following the explanation, the
influence of mixed embeddedness on refugee entrepreneurship will be discussed.
4.3.1. Institutional embeddedness
For refugees, the institutional environment is difficult to understand. As mentioned, regulatory
institutions deal with policies, legal procedures and laws. Refugees are not familiar with the
system and the structure of the host country. Thus, legal barriers, and restrictions are difficult for
them to cope with. Moreover, the lack of clarity about the legal procedures makes it even more
difficult for refugees, which leads to the problem that they realise their mistakes regarding the
legal aspects late. Most of the time they only realise that they made a mistake, when someone
from the legal department approaches them (Wauters & Lambrecht, 2008).
17
Apart from the difficulty of dealing with the legal system, refugees also struggle with their lack
of knowledge about the host country’s culture, norms, values and political and business
environment (Meister & Mauer, 2018).
There is also the difficulty in receiving support from formal institutions such as banks. Refugees
do not get their loan applications approved easily. They have to provide more information and a
business plan. Then the application might be approved. Getting a loan approval is only one
example, where discrimination is revealed. Refugee entrepreneurs often face discrimination in
employment, capital markets and even consumer markets. Excessive regulations, discrimination
and compliance requirements and also the demanding policies for receiving financial support are
barriers refugees have to overcome (Kloosterman et al., 2016).
As there are many legal barriers to overcome, refugees often give up their business and feel
discouraged (Wauters & Lambrecht, 2008).
4.3.2. Social embeddedness
Social embeddedness plays an important role when it comes to business growth and success of
entrepreneurs. As explained above, social embeddedness means that the entrepreneur is
embedded into a social network. For entrepreneurs it is very important to extend their social
network and build relationships. If the entrepreneur has a big network, he or she is also able to
gain more knowledge and information, which can help them in establishing a successful business.
Furthermore, the social network is also a great support, as each member can share his or her
knowledge and experiences (Jack & Anderson, 2002; Kloosterman, 2010).
Especially for refugees, social embeddedness is a really crucial factor in their business process.
Through the social networks, the entrepreneurs can learn about the cultural norms, values and
routines. It helps them to understand the local markets better. In the case of refugee entrepreneurs
having strong ties and being well embedded in a social network are very important. Refugee
entrepreneurs have to rely on their social networks, since they do not have a lot of resources and
lack access to credit (Wauters & Lambrecht, 2008). Refugee entrepreneurs definitely suffer from
the lack of financial resources. As it is difficult to raise capital from formal institutions such as
banks, the majority reaches out to their social networks consisting of close acquaintances who are
prepared to support them financially (Kloosterman et al., 2016).
18
Refugees fled their home countries and are often not well integrated in the society of the host
country. In addition to the discrimination they receive within the host country, they often also
have difficulties to integrate themselves with the immigrant community and the host country
population. This leads to the result that they only stay in contact with people who have the same
ethnic background (Kloosterman et al., 2016; Wauters & Lambrecht, 2008). As they usually
become close to other individuals with the same ethnic background, they tend to form their own
networks. Within this network they exchange their entrepreneurial ideas and support one another
(Bizri, 2017).
4.3.3. Difficulties and lack of embeddedness
Refugees entrepreneurs have to face various difficulties and obstacles, when they plan to
establish their own company, in comparison to migrant entrepreneurs. Primarily, refugee
entrepreneurs already have limited opportunities when it comes to starting a business. The
entrepreneurial characteristics of refugee entrepreneurs differ from native entrepreneurs as well
as migrant entrepreneurs. They are more complex and combine certain cognitive, affective and
behavioural characteristics (Meister & Mauer, 2018).
As it was mentioned before, refugees are people who are forced to flee from their own countries,
whereas migrant entrepreneurs set a plan to leave their homes in hope for having greater
opportunities in the host country. Thus, migrant entrepreneurs already have some sort of a
strategy and are well prepared for their move to the new country. On the other hand, refugees
have to encounter all kinds of obstacles within their economic integration process, besides their
social integration process. (Meister & Mauer, 2018; Shneikat & Alrawadieh, 2019).
One of the barriers is the lack of understand the institutional environment. It was previously
mentioned that refugees struggle with the legal system and the legal procedures. The institutional
environment hinders refugees in becoming better embedded (Meister & Mauer, 2018; Wauters &
Lambrecht, 2008). They are not familiar with the legal regulations and compliance requirements
as well as financing policies. Bureaucracy, complex procedures, limited mobility freedom,
unclear laws, lack of special legislation and privileges for refugee entrepreneurs, not clearly
stated legal status of the refugee and the lack of governmental support are often mentioned at the
key issues that refugees have to face (Alrawadieh et al., 2019) .
19
As mentioned, institutional norms and expectations influence the entrepreneurial actions and
business strategies (Langevang et al., 2015). Without the knowledge about the host country’s
legal regulations and the information on the norms and political and business environment
refugees have it quite difficult (Meister & Mauer, 2018). Refugees do not have sufficient
understanding of the financial matters which are necessary to start and run a business. As
refugees usually do not have to financial resources to start a business, they have to apply for a
bank loan. To receive loans, they have to provide solid business proposals and good credit scores.
There are additional steps such as applications for registrations, licenses and certifications, health
insurance, attorneys and accountants that have to be prepared and fulfilled. Refugee entrepreneurs
often do not have financial literacy nor the financial resources to overcome these challenges.
Furthermore, bank system and the business culture of the host country might be very challenging
and difficult for them to understand (Fong et al., 2007).
Dealing with the legal institutions is already complicated by itself. However, many refugees also
have to overcome the language barrier. Due to the insufficient language skills, miscommunication
and frustration emerge between refugees and the governmental institutions (Meister & Mauer,
2018). The importance of language is highlighted for refugees, as it is one step of their integration
within the host community. (Shneikat & Alrawadieh, 2019). Knowing the language is generally
considered as a relevant aspect of professional integration. If refugee entrepreneurs do not have
the necessary language skills, it is difficult for them to run their own business (Wauters &
Lambrecht, 2008).
Furthermore, refugees experience difficulties with the recognition of their education and
qualifications. As refugees have to leave their home country at an uncertain time, they are not
able to pack their belongings. Therefore, most of the refugees do not have diplomas and
certificates with them, hence why their educational achievements can often not be proven and
accredited. Often there are also cases in which such documents just do not exist, as it was maybe
not necessary in their home country. So, when they arrive in the host country, they do not have
any proof of their education and experience. This is a problem for refugees, as they usually have
to proof their professional skills in order to become an entrepreneur. Even if they have their
diplomas and certificates, there is the difficulty to decide whether they are equivalent to the
education level in the host country. When the diplomas are declared equivalent and recognized,
then they can be accepted. However, the process of declaration and recognition usually takes a
long time (Wauters & Lambrecht, 2008).
20
Many refugees form their own networks with individuals from the same country or the same
ethnic group, as they get the feeling of familiarity outside of their home country. Often the
business relationships extent only to their family and friends. They usually feel more comfortable
with colleagues and employees who share the same culture. Such networks consisting of refugee
business owners from different countries are rather small and informal in comparison to the
networks of immigrant entrepreneurs. Refugees have less opportunity to participate in long-term
chain migration and thus, they are not able to form a big and formal self-help networks (Bizri,
2017; Gold, 1992). In their business network they have access to knowledge, capital and
information (Bizri, 2017). However, if they are only embedded in the homogeneous ethnic
networks, they will not be able to find potential markets due to the lack of access to the
information on the business environment (Kloosterman, 2010). They have to reach out to the
local ecosystem in order to extent their business network. If refugee entrepreneurs limit their
business relationships only with those in their same ethnic group, they will most probably not
receive the necessary information and support to foster their business. (Meister & Mauer, 2018;
Wauters & Lambrecht, 2008).
21
5. Social Capital Theory
In this chapter the social capital theory will be defined and explained. First the general definition
of the term social capital will be presented. Then the linkage between social capital theory and
refugee entrepreneurship will be discussed.
5.1. Definition of Social Capital
Firstly, it is important to differentiate social capital from human capital. The main difference is
the main idea of capital. In the case of human capital the individuals are the ones who have the
resources. In social capital the importance lies on the social networks and relationships between
different individuals.
Lyda Hanfan was the first one who introduced the term “social capital” at the beginning of the
20th century. At that time sociology did not pay much attention on social capital as a determinant
for the formation and development of social groups. (Schechler, 2002).
The term “social capital” is used to identify resources that exist in a social network. By fostering
the connection between individuals social capital creates values. Thus it can be a result of
relationships which happening among communities, individuals, societies and organisations
(Duarte Alonso et al., 2020).
To explain it in a straightforward and simple way: Social capital is an “investment in social
relations with expected returns” (Lin, 1999, p. 30).
There are three well-known sociologist and researchers who shared their definitions of social
capital. The French sociologist Pierre Bourdieu defined social capital as actual or potential
resources related to existing, permanent social network for institutionalized relationships of
mutual acquaintances or recognition (Portes, 1998; Rogošić & Baranović, 2016). Another
definition by the American sociologist and researcher James Samuel Coleman is that “social
capital inheres in the structure of relations between actors and among actors” (Coleman, 1988,
p. 98). Lastly, Robert D. Putnam, who is an American political scientist, said: “Social capital here
refers to features of social organization, such as trust, norms, and networks, that can improve the
efficiency of society by facilitating coordinated actions” (Putnam et al., 1994, p. 167).
Social capital is not a private property of an individual, but a collective, public good (Julien,
2015). It can be understood as a wealth or benefits that exists because of the social relationships
22
and respective position of the member in a social network. This means that social capital is a
resource, which is only available to the members within the social structure (Duarte Alonso et al.,
2020). Moreover, it is not tangible and only exists in the relations between the agents in the
society. It guides the activities of an individual in a structured way (Coleman, 1988; Rogošić &
Baranović, 2016). A main point of social capital is that is has a productive emphasis, as it
supports the members of achieving a specific goal which would otherwise not be possible
(Coleman, 1988).
The exchange of resources between the members strengthens the relationships that exist in the
group. Social capital only exists because of the social relationships and consists of the social
obligations that are connected with the relationships. Thus, the relationship between the members
within a social network are important (Julien, 2015; Portes, 1998).
Social trust, norms and networks are needed for an efficient cooperation and coordination of the
members for mutual benefits. Only then they can effectively pursue their shared objectives
together (Duarte Alonso et al., 2020; Fuchs, 2006; Vorhaus, 2014). Furthermore, mutual
understanding and shared values within social networks and communities are also important
factors, in order to make a cooperative action possible (Fuchs, 2006).
Its supply or inventory would be the relationships between individuals within the social network.
Trust, mutual understanding, mutual values and behaviours are on the other hand not social
capital, but they are characteristics which define the quality and stability of these relationships.
However, it depends on the personal living conditions and actions of the members in the
community, how much the group or the individual can gain from this social network. The social
network is only profitable, if at least one of the members is able to gain something from the
resources offered by the other members (Fuchs, 2006).
The main benefit of social capital is the access to information that can only be obtained through
social relations. These relationships act as information channels and are valuable, as they have
potential information they can provide to the individuals (Coleman, 1988). The social ties can
provide an individual with useful information about the market opportunities and demands, which
are otherwise not available (Lin, 1999).
The information facilitates actions. Coleman sees social capital as a unique resources that can
provide information and supports individuals in developing and gaining specific skills (Coleman,
1988; Julien, 2015).
23
Social ties are located in certain strategic locations and/or hierarchical positions and have a lot of
information on the market needs and demands. Furthermore, these ties also have an advantage for
an organisation or a community, as they are informed about the availability and interest of
probably unrecognized individuals. Organisations can recruit skilled individuals and individuals
can find organisation which fits to their skills and provide appropriate rewards for their social
capital (Lin, 1999). Social capital is also seen as a unique resources that can provide information
and supports individuals in developing and gaining specific skills (Coleman, 1988; Julien, 2015).
In order to maintain social capital, individuals need the motivation or reasons to contribute their
own personal resources to the collectivity. Therefore, there have to be norms, sanctions and
authority, which help to create and sustain social capital. The important norm is that the
individual should act out of the interest for the community rather than for his or her own interest
(Julien, 2015).
Trust and trustworthiness within the group are the primary relational features of social capital
(Coleman, 1988). In addition to collectivity and trustworthiness within a group, networks are also
an important part social capital (Portes, 1998) Within a closed network obligations, expectations,
exchange of information, norms and sanctions and the relationship with authority exist. These
aspects of social capital are more visible in a closed network (Rogošić & Baranović, 2016).
According to Coleman, obligations within a group occur, because for example actor A does
something for actor B and trusts actor B to give something back in the future. This establishes an
expectation in actor A and an obligation in actor B’s side. This kind of obligation can be seen as a
credit by actor A for the performance by actor B (Coleman, 1988). An important aspect of his
theory of social capital is reciprocity. If one person does something, there is the expectation that it
will be repaid in the future by another individual or through group membership (Julien, 2015).
Individuals who interact in many social contexts tend to develop strong norms of acceptable
behaviour. They convey their mutual expectations to another member in many reinforcing
encounters (Putnam et al., 1994).
24
5.2. Social capital and refugee entrepreneurship
In this sub-chapter it will be discussed how social capital effect refugees and refugee
entrepreneurs and how important it is to them.
5.2.1. Bonding and bridging social capital
There has to be a distinction made between bonding and bridging social capital, in order to
understand refugee entrepreneurship and self-employment (Alexandre et al., 2019). Firstly,
bonding social capital is about dense networks consisting of people who share the same ethnicity
and have similar socio-economic status. Moreover, for refugees who strive for self-employment,
bonding social capital is significant, as solidarity and trust can facilitate cooperation and support
and reduce free riding. Furthermore, it also provides access to low-paid, trusted labour, as the
entrepreneurs work with people who they share a close relationship with. Lastly, the last positive
aspect of bonding social capital is that the refugee entrepreneurs have access to additional
business-related information (Kanas et al., 2009).
Bridging social capital refers to loose networks of heterogeneous groups. It means that refugees
and immigrants create a social network with natives. These natives bridge the refugees and
immigrants with people from ethnicities and socioeconomic status. Furthermore, bridging social
capital can provide nonredundant information about labour market opportunities and influence to
refugees and immigrants. People from the host countries certainly have more information(Kanas
et al., 2009) .
However, it is not sure that bridging social capital has a significant positive effect on self-
employment in comparison to bonding social capital. According to Kanas, van Tubergen and van
der Lippe, immigrants with more bridging social contacts are less likely to be self-employed
(Kanas et al., 2009).
5.2.2. Integration
The importance of social capital and social relationships is also connected with the integration
theory (Cheung & Phillimore, 2014). When talking about refugee and migrant entrepreneurship,
it is also important to tackle the topic of integration in the host countries. There is the problem of
integration, segregation and discrimination against ethnic minorities when it comes to the
economic needs and labour market opportunities. Especially intrinsic cultural factors hinder
25
labour market integration. They do not have a high chance to get a job in the host country in
comparison to the natives (Alexandre et al., 2019). Thus, self-employment can provide them a
possible solution escaping this economic uncertainty. Besides it can also encourage the
integration of refugees into the society of their host country (Wauters & Lambrecht, 2008).
As it has been mentioned social capital is another resource that it shared in social groups and
networks. This topic has gained more attention in immigrant entrepreneurship research, as it has
been found out its importance. In theory, integration into the host society plays an important role.
A vertical integration with ethnic suppliers and resource mobilisation through their ethnic
networks can help refugee entrepreneurs in reducing costs, getting support and better credit and
contractual terms from their business partners (Dheer, 2018).
In general, it can be said that refugee entrepreneurship facilitates integration for the refugees into
the new society and it can also boost the economy in the host country (Wauters & Lambrecht,
2008).
5.2.3. Self-employment and entrepreneurship
Refugees have to face the struggle of unemployment when they arrive at the host country, even if
they have high human capital and are technically skilled (Alexandre et al., 2019; Dheer, 2018).
As mentioned, they have to go through discrimination and blocked opportunities on the labour
market, which leads to the problem of unemployment. Thus, self-employment is often seen as the
solution to unemployment and poverty. Refugees choose entrepreneurship to improve their lives
and most importantly survive (Alexandre et al., 2019).
Self-employment provides refugees more income than being an employee. Sometimes it happens
that the small ethnic entrepreneurs perform better than their native counterparts (Flap et al.,
2000). On the other hand, there might also be some cases where self-employed refugees earn less
money than refugees who are employed. Furthermore, many suffer from physical and mental
exhaustion due to the long working hours (Wauters & Lambrecht, 2008).
When someone plans to start his or her own business resources such as information, capital, skills
and labour are essential. New entrepreneurs do not have all the resources they require. Therefore,
they have to look for support from their contacts to acquire them. Obtaining resources through
social networks or to gain social capital is important for every entrepreneur, but it is particularly
important for refugee and immigrant businesses (Katila & Wahlbeck, 2011).
26
One of the most important social capital for refugees and their economic advancement is the
family. Family members do not cooperate simply because of self-interest, but from moral order.
There is the feeling of obligations among family members, which builds a degree of solidarity.
The family supports self-employment, as they support the labour work and share their financial
resources. Everything is much more informal. As the entrepreneur is able to rely on family
labour, the operating costs are low (Sanders & Nee, 1996). Family workers are more productive
than nonfamily workers, although the hourly wages are low. Furthermore, there is also higher
trust in between family members. As the members are participating in the family business there is
mutual dependence, expectations and trust, which are important types of social capital for
families (Katila & Wahlbeck, 2011; Sanders & Nee, 1996).
Moreover, social networks are critical for entrepreneurial success, because through them
entrepreneurs are able to get information on market opportunities and receive support and
resources that are needed for the start-up process. Especially for refugees and migrants, social
connections are important, because they have insufficient knowledge about the host country and
therefore have a higher need for support. Their lack of knowledge of local businesses is a big
constraint for them to start up their own business. Most importantly, they are not aware about the
market opportunities in the host country (Rashid, 2018). Refugees often start their own business
to escape unemployment. Therefore, to them the choice of market sector and market
opportunities are not as important as survival. They start businesses in market sectors they are not
that familiar with. They tend to choose a sector for which they are qualified or where they see
market opportunities. In many cases they also operate in market sectors where the barriers for
market entry are low. In these sectors only limited skills and low financial investment is required.
However, they will most probably also offer lower profits. (Rashid, 2018; Wauters & Lambrecht,
2008).
27
6. Empirical study
6.1. Data collection
The data for this paper was collected as part of a broader research initiative developed and
implemented by a consortium of researchers from Johannes Kepler University Linz, Austria and
Lund University, Sweden. While the underlying research program builds up a longitudinal
dataset, here we use data from the second wave of data collection performed in spring and
summer 2020. In the second wave of data collection all respondents of the first wave were
interviewed via an online survey that was administered by email and complemented by measures
to enhance the response rate via telephone and social media channels such as Facebook,
Whatsapp and LinkedIn. Out of 962 individuals, who could be reached in the second wave, 176
participated in the second wave of the survey. Due to missing values, the analysed sample was
reduced to 99 observations.
6.2. Findings & results
In order to examine whether the hypotheses correspond with the theory, a correlation analysis of
the survey data was conducted.
The Pearson correlation coefficient (r) shows whether there is a linear correlation between
variables. The correlation coefficient ranges from -1 to +1. The value 1 represents a perfect
positive correlation, whereas -1 means that there is a perfect negative correlation. The value 0 or
the values close to 0 are indicators for a possible non-linear correlation. Moreover, it is also
necessary to know, if the correlation between two variables are significant or not. A significance
level p < .05 is the generally accepted threshold (Sekaran & Bougie, 2013).
For the operationalization of the dependent variable “entrepreneurial intention” we use the
following measurement item:
v_1: Have you taken steps towards starting your own company in your host country?
The questions of the survey will be split up in different sections and these are first the
measurement items used to capture the phenomenon of mixed embeddedness and the second set
of measurement items that was used to capture the construct “social capital”.
28
Mixed embeddedness
How many relationships do you have with people…
v_24: from your ethnic group
v_25: from similar ethnic groups
v_26: from neither your nor similar ethnic groups
v_27: from your home country
v_28: from you host country
Social capital
For starting a business, I have the necessary…
v_104: level of skills and competences
v_105: level of formal education
v_157: level of qualification required by law
v_106: level of industry experience and knowledge
v_107: level of experience and knowledge in starting and running a business
v_109: employees
v_110: people who start the business with me (co-founders)
v_111: understanding of the legal regulations in the host country
The following table 1 presents the results. A correlation analysis was conducted in order to
understand if embeddedness and/or social capital is/are related to the entrepreneurial intention of
Afghan and Syrian refugees in Austria and Sweden.
29
Tab
le 1
: C
orr
elati
on
an
aly
sis
of
the
surv
ey d
ata
**
Th
e co
rrel
atio
n i
s si
gnif
ican
t at
the
level
of
.01 (
two-s
ided
).
* T
he
corr
elat
ion
is
sig
nif
ican
t at
the
lev
el o
f 0.0
5 (
two-s
ided
).
(Con
tin
uat
ion
of
tab
le 1
is
on
pag
e 29 a
nd 3
0)
30
31
32
When we look at table 1, we find no positive correlations between v_1, the intention to start a
business, and the other variables.
The highlighted section presents a significance (p = .028) and a negative correlation (r = -.221)
between v_1 and v_104. With the operationalisation of the level of skills coded with smaller
values when respondents have more skills (reversed coded), this result means that with the levels
and competences also refugees’ entrepreneurial intention increases. Thus, refugees who have a
higher level of skills and competences have a higher intention to start their own business. The
refugees are aware about the importance of qualifications required by law, knowledge and legal
aspects for starting a business.
The correlation between v_1 and v_157 (r = -.008, p = .935) is very close to 0, which means there
is no linear correlation between these variables. Moreover, the significance level p is almost at 1.
Thus, this p-value is not statistically significant and indicates a very strong evidence for a null
hypothesis.
Furthermore, there is a correlation between v_1 and v_26 (r = -.021, p = .836). The negative
correlation between the business intention and the relationships with people from neither their
ethnic groups nor those who are from similar ethnic groups is significant.
There is only a weak (r = -.191) significant (p = .058) correlation between the intention of starting
a business and the relationship with people from the host country.
The answer to the research question is that the level of skills and competences are the most
important factors for their decision to start their own business in the host country. Although
social capital and social embeddedness are crucial factors for a successful entrepreneur, in the
case of the entrepreneurial intention of refugees, they do not have a strong influence on the
decision of the Afghan and Syrian refugees living in Austria and Sweden.
As it has been presented in the theoretical research chapter, refugees usually cluster together with
other individuals from the same or similar cultural background. However, these relationships do
not have a strong influence on their intention of starting a business. The social ties to people from
the host country also do not systematically affect the decision of the refugees.
33
7. Conclusion and future outlook
Both mixed embeddedness and social capital are important for refugees in general, as they have
to integrate themselves into the new environment. However, integrating oneself is not easy.
Refugees do not only have to deal with their past experience in their home country, but they also
have to overcome additional difficulties in the host countries. The lack of embeddedness brings a
lot of disadvantages to refugees, one of them is discrimination within the society of the host
country. Due to their lack of knowledge, qualifications and language skills they do not have many
chances on the labour market to find a decent job. Thus, refugees see entrepreneurship as a
possible way out of poverty and a stepstone for integration in the society. Social capital and
social embeddedness play an important role in this.
In this study on refugee entrepreneurship the findings show that knowledge, qualification and
skills are the most important factors for their entrepreneurial intention. Social networks do not
have a high impact on the decision here. An explanation for why social networks do not have a
big impact on their decision could be that within the network of the respondents there are not
many entrepreneurs. Social embeddedness plays a crucial factor for successful entrepreneurs.
Being well embedded helps refugees to gain knowledge, information and resources.
As it has been mentioned, there are also legal barriers such as laws, legal procedures and policies
that refugees have to consider when they plan to become an entrepreneur. Thus, it would be great,
if the government can support refugees in starting their own business, as it can also foster the
entrepreneurship in the country. Therefore, a further research regarding the needs and support for
refugee entrepreneurs would be interesting.
It has to be highlighted that this study only focuses on Afghan and Syrian refugees who are
currently living in Austria or Sweden. Therefore, the findings cannot be applicated to all refugees
living in either of these two countries or even refugees in general. There might be other results for
refugees from other countries. Furthermore, the findings might depend on the host country and its
society as well.
34
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