Explaining the multifaceted patterns of migrant firms in the global economy: a resource-based approach Open Access

Despite the challenges posed by the changing economic environment at the global level, the phenomenon of migrant entrepreneurship has consolidated its presence as a distinctive feature of the global economy. In the recent past, migrant firms have flourished across all developed countries (OECD, 2023), extending their reach into various industries (Waldinger, 2000; Kloosterman and Rath, 2010), locations (Liu, 2021) and encompassing both small-sized businesses and more structured entities (Azoulay et al., 2022). The quantitative increase in migrant firms has persisted despite the difficulties faced by this specific group of businesses in recent times. Alongside trade tensions, geopolitical shifts and technological changes, the economic environment for migrants has become more uncertain following the international mobility restrictions imposed by the COVID-19 pandemic (Martin and Bergmann, 2021) and the rise of populist movements worldwide, associated with the increasing support for nationalist ideologies and protectionist policies as well as the push for stricter immigration controls (Schain, 2018; Guriev and Papaioannou, 2022).

In the last 40 years, the behaviour and performances of migrant firms have been explained by different theoretical frameworks developed by the economic and sociological literature (Dabic et al., 2020; Sinkovics and Reuber, 2021). These range from ethnic-based theories, which emphasise the role of co-ethnic social and economic networks (Wilson and Portes, 1980), to breakout theories that underscore the importance of integration into mainstream markets (Engelen, 2001; Pécoud, 2004). Additionally, a number of scholars have emphasised the role played by the cultural, economic and social background of the migrant entrepreneur (Yoon, 1991; Sanders and Nee, 1996; Schäfer and Henn, 2018; Kushnirovich et al., 2018; David et al., 2021). More recently, the mixed-embeddedness framework has emerged as a leading theoretical framework, highlighting the interaction between entrepreneurial resources and the opportunity structure offered by the host country at the national and local levels (Kloosterman et al., 1999; Kloosterman and Rath, 2001). Despite recognizing the relevance of these theories in describing the migrant entrepreneurship phenomenon, this contribution claims that the existing frameworks fall short in providing a comprehensive picture of the “competitive heterogeneity” among migrant firms, defined as the differences in their size and economic performance as well as the underlying factors that explain these disparities (Hoopes et al., 2003; Stoelhorst, 2023).

A comprehensive theory of migrant entrepreneurship must account for the diversity and heterogeneity of the evolutionary paths followed by migrant firms while preserving the distinctive traits that characterize this type of enterprise. The key elements that are essential to its conceptualization are: (a) the foreign identity of the entrepreneur; (b) the role of the entrepreneur as a proactive agent focused on achieving specific objectives and (c) the presence of firm-specific resources accumulated within the organization, which, independently of the entrepreneurial resources, drive the growth and variation in the structures and performances of migrant businesses. The foreignness of the entrepreneur (requirement a) refers to his/her demographic, cultural and/or institutional detachment from the host country’s context, along with his/her interaction with migrant and transnational networks (Berry, 1997; Sui et al., 2015). The interactions between the entrepreneur and migrant stakeholders can result in either a disadvantage (liability of foreignness) or a competitive advantage (asset of foreignness). The ability to effectively leverage the relationships with migrant and transnational stakeholders is central to the success of migrant businesses (Portes and Jensen, 1989; Portes et al., 2002; Chand and Ghorbani, 2011). Moreover, migrant entrepreneurs pursue the goals of starting and consolidating their business ventures (requirement b) similarly to native entrepreneurs, but with a distinct emphasis on adapting and navigating market conditions, access to credit and the regulatory frameworks of the host country (Aldrich and Waldinger, 1990; Kloosterman, 2010; Solano et al., 2022). Finally, the growth trajectories of migrant businesses are influenced by their ability to accumulate and leverage additional technological, organizational and managerial resources that are different from those directly tied to the entrepreneur (requirement c). These firm-specific resources explain the existence of development paths that differ from those achievable when only entrepreneurial resources are exploited.

The absence of even one of these elements significantly reduces the explanatory power of a theory of migrant entrepreneurship. Without requirement (a), the migrant enterprise becomes indistinguishable from a native business; without requirement (b), the entrepreneur’s agency loses significance; and without requirement (c), the enterprise is reduced to purely entrepreneurial functions, eliminating its potential for scalability, both in terms of size and market reach. Acknowledging these requirements leads to the conclusion that, at the current stage of development in the debate on migrant entrepreneurship theory, we still lack a coherent and unified conceptual framework. While various theoretical approaches offer valuable interpretative insights and explain certain key aspects of migrant entrepreneurship, they remain partial and lack generalizability (Lakatos, 1978). As illustrated in Table 1, each of the four main approaches towards migrant entrepreneurship tends to emphasise entrepreneurial agency (requirement b), but in doing so, they overlook one or both of the other key dimensions.

Within ethnic-based models, migrant entrepreneurs undoubtedly possess “foreign” characteristics that tie them to their community of origin, setting them apart from native entrepreneurship (Wilson and Portes, 1980; Portes and Bach, 1985; Light et al., 1994). From their community, they derive both tangible and intangible resources as well as economic opportunities, while also gaining protection from mainstream competitors. In addition to their “foreign” identity, migrant entrepreneurs are granted a degree of independent agency, though it is largely confined to the markets and environments shaped by the co-ethnic community. However, these businesses are typically not expected to possess resources beyond those directly tied to the individual entrepreneur. Their organizational model is highly simplified and the competitive environment is streamlined, leaving little room for managerial actions or for the accumulation of skills and knowledge beyond what was initially available. As a result, migrant businesses tend to exhibit minimal differentiation in terms of organizational structure, size, sectoral diversification or market reach.

According to the conclusions drawn from break-out theory, migrant firms are expected to explore economic opportunities by interacting with actors outside the enclave economy and experimenting with diversified business models and organizational structures (Engelen, 2001). However, there is nothing in this approach that fundamentally differentiates migrant entrepreneurs from native ones. Indeed, migrant entrepreneurs are expected to focus primarily on the success of their business rather than being “obsessed with ethnicity and identity matters” (Pécoud, 2004).

The entrepreneur-based literature represents an advancement in the development of migrant entrepreneurship theory, but the excessive focus on the entrepreneur leads to an underestimation of the role of ethnic resources and a neglect of the importance of the tangible and intangible resources, shared competencies and knowledge accumulated by migrant businesses over time. Moreover, while entrepreneurial resources are significant for small companies, they are insufficient to explain the dynamics of larger organizations, which are characterized by more complex managerial structures and sophisticated combinations of knowledge flows.

Finally, despite its centrality in the migrant entrepreneurship literature, the mixed-embeddedness framework is not without limitations. Although its initial goal was to integrate agency and structure, the popularized version of the framework and subsequent applications have mostly focused on the concept of opportunity structure and formal institutional embeddedness (Barberis and Solano, 2018). While this framework broadens the range of migrant business models by incorporating external opportunities alongside entrepreneurial resources, it tends to overemphasise the role of individual actors. The limited attention given to the accumulation of firm-level resources and capabilities makes this approach inadequate to fully explain the diversity of evolutionary paths and the differentiation of migrant businesses beyond the influence of economic and institutional factors. Moreover, it fails to account for the heterogeneity in their growth rates.

In an attempt to meet the three identified requirements, this article introduces a novel theoretical framework that allows to categorize in a unitary framework the migrant enterprise as an autonomous entity, providing a reliable explanation of the heterogeneous features and performances displayed by these firms, even when they operate in similar socioeconomic settings and they are managed by entrepreneurs of the same ethnic background. The framework proposed in this article draws insights from the resource-based view (Wernerfelt, 1984; Peteraf, 1993; Kor and Mahoney, 2004; Lockett et al., 2009), combining them with the new stakeholder theory (NST) (Barney, 2018; McGahan, 2021, 2023). By integrating the two theoretical perspectives, the migrant enterprise can be described as a collective entity endowed with peculiar tangible and intangible firm-level (requirement c) and entrepreneurial resources (requirement b) that are accumulated, activated and revitalized through the set of strategies pursued by the firm throughout its existence. The peculiar resource endowment of each migrant firm moderates all the interactions with the internal and external network of local co-ethnic and non-co-ethnic stakeholders, as well as those with transnational stakeholders, determining different rent distribution outcomes. These stakeholders represent a peculiar feature of the migrant firm and are associated with the foreign identity of the migrant entrepreneur (requirement a).

An important implication of the theoretical framework proposed in this paper is the opportunity to overcome a vision of the immigrant enterprise solely based on the presence of liabilities. In the case of the immigrant businesses, the concept of Assets of Foreignness (AoF), introduced by international business scholars to explain the peculiar features of Multinational Enterprises (MNEs), can effectively be associated with the set of entrepreneurial and firm-level resources that are accumulated, activated and revitalized by migrant firms throughout their existence. This complex set of resources can be enhanced through the multiple links migrant firms have with local and transnational stakeholders as well as by exploiting the opportunity structure available in the destination country. Migrant community resources can further enhance the AoF as long as they are exploited by the immigrant enterprise as a tool to enhance innovation, knowledge acquisition and organizational growth (high road), rather than as a rent extraction tool to exploit local and transnational stakeholders (low road).

The theoretical frameworks outlined in the introduction and summarized in Table 1 share some important shortcomings. To overcome these limitations, this article proposes an alternative conceptualization grounded in the resource-based view (RBV) initially formulated by Edith Penrose (1959) and subsequently refined over time by several scholars (Wernerfelt, 1984; Barney, 1991; Peteraf, 1993; Kor and Mahoney, 2004; Helfat et al., 2023). While widely utilized in various academic literature to explain variations in firm performance within and across industries (Varadarajan, 2020), its application to the literature on migrant entrepreneurship remains a largely unexplored frontier (Bolzani, 2020). In a recent special issue of the Strategic Management Journal, Helfat et al. (2023) emphasised that the resource-based view (RBV) continues to hold substantial value, particularly in its application to emerging contexts, the development of new concepts and the use of innovative methods.

Through the adoption of an RBV, our objective is to underscore the existence of heterogeneous endowments of strategic resources, routines and knowledge bases among migrant firms, serving as potential sources of value creation. These endowments include the individual resources that migrant entrepreneurs accumulate throughout their migration experiences (entrepreneurial resources) and the firm-level resources generated through the collective efforts of the organization. Following Barney (2018) and McGahan (2021), our theory integrates the RBV with elements from the NST, highlighting the potential role of co-ethnic and non-co-ethnic migrant stakeholders, as well as transnational stakeholders, in influencing the value creation and value appropriation process of migrant firms. The NST is particularly valuable to our framework as it expands on the original stakeholder theory, highlighting that stakeholder contributions go beyond financial considerations (McGahan, 2023). It also introduces the concept of stakeholder enfranchisement, differentiating between more fully enfranchised stakeholders (such as ethnic and non-co-ethnic stakeholders in our case) and those with less clearly defined enfranchisement. Furthermore, the NST posits that resources are linked to firms through stakeholders, aligning it with the RBV and supporting their integration (McGahan, 2021).

The contributions from migrant and transnational stakeholders further stimulate the migrant firm’s accumulation of new resources and foster the revitalization of those already present in the organization. However, the extent to which migrant and transnational stakeholders contribute to the value creation process depends on the value sharing approach to which the migrant firm commits. While high-road approaches to value appropriation foster stakeholder engagement and support sustained organizational growth, low-road strategies that rely on opportunism and stakeholder exploitation tend to result in unsuccessful outcomes, particularly in the medium to long term.

Overall, our theoretical framework can be used to explain “competitive heterogeneity” among migrant firms, i.e. the visible differences in their size and economic performance and the underlying heterogeneity that explains these differences (Hoopes et al., 2003; Stoelhorst, 2023). Migrant firms exhibit diverse organizational structures because they rely on heterogeneous entrepreneurial and firm-level resources, which can be combined in various ways and result in multiple value creation outcomes. Firms that are more effective in generating economic value and adopt high-road value-sharing strategies with migrant and transnational stakeholders are expected to achieve better performance and higher growth rates in the long term. Therefore, the presence of larger organizational structures among migrant firms can be justified by the presence of differential strategies and outcomes in the value creation and value appropriation process.

An important implication of the theoretical framework introduced in the following sections is the opportunity of overcoming the traditional paradigm of migrant firms solely based on the presence of liabilities, highlighting how entrepreneurial and firm-level resources can represent Assets of Foreignness (Mallon and Fainshmidt, 2017) for migrant firms.

The diagram presented in Figure 1 summarizes the main features of the theoretical model discussed in the following sections.

Migrant firms are characterized by diverse endowments of tangible and intangible resources, routines and knowledge bases that contribute to the value creation process. While acknowledging the significance of the entrepreneur’s accumulated resource endowment, our approach emphasises the crucial role of resources that are intrinsic to the migrant firm. These resources are accumulated by the organization over its lifespan, and they endure within the company regardless of the entrepreneur’s presence or direct involvement. The complex combination of entrepreneurial and firm-level resources plays a key role in moderating the influence of transnational and local networks of co-ethnic and non-co-ethnic stakeholders engaging with migrant firms, along with the opportunity structure in the host country. These moderating effects contribute to explain the coexistence of a broad spectrum of organizational models, even within the confines of the same ethnic boundaries as well as the heterogeneous performances observed among migrant businesses operating in similar host environments. This aspect represents a significant departure from the traditional approaches introduced by the migrant entrepreneurship literature.

It is worth reiterating that the differentiation between entrepreneurial resources and firm-level resources is particularly relevant in the proposed framework. The former set of resources encompass the array of tangible and intangible assets accumulated by an entrepreneur throughout their personal life. This complex combination of human, financial and social capital is often the result of a diverse array of educational, professional and human experiences in the migrant’s country of origin, destination or other countries visited during the migration experience (Yoon, 1991; Ram et al., 2017; Min and Bozorgmehr, 2000; Sanders and Nee, 1996; Virdee, 2006). Therefore, migrant entrepreneurial resources are typically more complex compared to those acquired by individuals without a migration background. On the other hand, firm-level resources are linked to the material and immaterial assets associated with the business activities as well as the organizational and managerial skills available within the firm. Firm-level resources are not exclusive to migrant firms, as indigenous competitors also leverage their resource endowment. In both scenarios, the effective utilization of their potential depends on the interplay between material and immaterial resources and the organizational and managerial skills within the firm (Kor et al., 2007; Foss et al., 2008; Helfat and Peteraf, 2015; Pitelis, 2007). Examples include the ability to process information on relevant markets, control over technological assets and the ability to integrate organizational processes along the value chain.

Entrepreneurial and firm-level resources play distinct roles in the three primary stages that determine the effective utilization of the resource endowment: accumulation, activation and revitalization. Migrant firms are in a unique position in the accumulation stage because they have the potential to access a broader range of distant and combinatorially novel endowments (Felin et al., 2023), allowing them to pursue searches that are not necessarily bounded by the local or national opportunity structure in the host country. This extensive reservoir is shaped by the entrepreneurial resources developed before the migrant firm was established and influenced by the migrant entrepreneur’s past travel and work experiences. These assets are associated with the prehistory of the migrant firm and are crucial in that they generate a path-dependent process that enhances the firm’s ability to identify and exploit entrepreneurial opportunities in the host country (Helfat and Liebermann, 2002). Additionally, migrant firms can seize their local migrant and transnational stakeholders to broaden their search process, tapping into their skills, experiences and global networks. However, migrant firms will differ in their search capabilities for two reasons: first, migrant entrepreneurs have diverse backgrounds, characterized by different migration journeys and varying work and entrepreneurial experiences. Second, as we will discuss in the next section, migrant firms differ in their resources appropriation strategy, which ultimately influences the extent to which local migrant and transnational stakeholders contribute to the resource accumulation process. Both factors influence the “search image” (Felin et al., 2023) migrant firms use in their quest for new resources: firms view their environment through the lens of their existing endowments, meaning that those with more diverse resources are able to access a more varied set of new opportunities (Felin et al., 2023).

The second stage of the resource utilization process involves their activation and nourishment. Such a process is effectively realized within the organizational boundaries, thanks to the presence of firm-level resources that are valuable, rare, inimitable and non-substitutable (VRIN) (Barney, 1991; Peteraf, 1993). Firm-level resources are essential for preserving and enhancing the competitive advantage of migrant firms in the long term. While entrepreneurial resources are necessary for initiating a firm, the reciprocal is also true – firm-level resources can amplify entrepreneurial resources, and entrepreneurs can employ them to establish a new firm at a later stage in their immigrant life or if they decide to return to their countries of origin.

The existence of strategic resources is crucial for the success of the migrant firm, but their value-creating potential can fade with time and deployment (Karadag and Poppo, 2023). While the changing dynamics of the economic environment and competitive landscape increases the risk of obsolescence for both entrepreneurial and firm-level resources, strategic resources decay can occur independently from the presence of external forces. This aspect is especially relevant for non-tradable resources (Le Breton-Miller and Miller, 2015) associated with the human, managerial and social capital embodied in migrant entrepreneurs, their employees and the other local and transnational stakeholders. Migrant firms can prevent resource exhaustion through the revitalization process, which extends their useful life through reinvestment. Consequently, migrant firms should strive for continuous renewal of both entrepreneurial and firm-level resources, acquiring new knowledge and staying at the forefront of technological advancements. Co-ethnic and non-co-ethnic migrant stakeholders as well as transnational stakeholders, can contribute to protect and replenish the endowment of migrant firms from external factors, provided that they are effectively involved in the value distribution process through high-road strategies.

Entrepreneurial and firm-level resources shape and are shaped by the local and national opportunity structure in which migrant firms operate. On one hand, economic and political-institutional conditions impact the extent to which resources can be accumulated, activated and revitalized, influencing market dynamics and establishing the laws, regulations and policies that can either foster or constrain the activities of migrant entrepreneurs (Aldrich and Waldinger, 1990;Kloosterman, 2010). However, our model also highlights how migrant firms’ resources and capabilities play a role in shaping and expanding the opportunity structure at both the local and national levels (Solano et al., 2022). The discussion introduced in the present section has highlighted that the degree of variety, richness and exclusiveness of the core competences does not arise from a mechanical process of acquisition but derives from a conscious act of the migrant enterprise during its ongoing interaction with a complex array of stakeholders. The following section clarifies this crucial aspect, contributing to integrate our theoretical framework by explaining the various ways through which migrant firms can engage in the value appropriation process.

The previous section has highlighted how migrant firms navigate a more intricate environmental landscape, extending beyond the local and national opportunity structure. Such a complex environment is essential for the accumulation of peculiar entrepreneurial and firm-level resources that can be used to create value and enhance the performance of these firms. However, the value creation process is not something static that is developed by the firm itself but rather a collective and dynamic process (Teece and Winter, 1984; Stoelhorst, 2023). For migrant businesses, effective utilization of strategic resources is contingent on the interaction with co-ethnic and non-co-ethnic migrant stakeholders operating at the local level and transnational stakeholders, which add up to the role of the opportunity structure in the destination country (Zubair and Brzozowski, 2018).

It is worth noting that migrant firms also engage with local domestic stakeholders. While this stakeholder group is important, it does not represent a distinctive characteristic of migrant firms, as all businesses within the same local system interact with them. Moreover, the resources and knowledge provided by local domestic stakeholders are largely confined to the geographic and institutional boundaries of the area. As a result, while local domestic stakeholders can influence the resource accumulation, activation and revitalization process, their role is often not as significant or complex as that of co-ethnic and non-co-ethnic migrant stakeholders. These latter groups have a unique relationship with migrant firms that cannot be easily replicated by indigenous businesses (Wilson and Portes, 1980; Portes and Bach, 1985).

Migrant stakeholders in the destination country consist of two groups: (1) co-ethnic stakeholders, perceived as a collective asset within the co-ethnic network and classified as a club good (Galbraith et al., 2007) and (2) other non-co-ethnic migrant stakeholders. Although not co-ethnic, this second group shares the migratory experience, placing them in the same outsider status and relying on similar outsider-established connections (Berwing, 2019). Both groups include actors operating inside the enterprise (such as migrant employees) and members of the migrant community engaged in economic transactions with the firm as independent parties in the destination country. In the latter case, the group refers to suppliers of goods and services as well as partner firms that operate within the migrant entrepreneur’s country of origin or in other nations visited prior to reaching the ultimate destination country (Light et al., 1994). Both groups represent a potentially additional asset, in that they contribute to shape the opportunity structure, generating important sources of competitive advantage (Rusinovic, 2008; Freiling and Harima, 2019; Baklanov et al., 2014). However, the ability to exploit migrant stakeholder assets varies significantly even among migrant firms operating in the same economic environment.

As outlined in the previous section, migrant and transnational stakeholders play a key role in providing access to strategic resources, enhancing the value creation process for migrant firms. In this section, we further argue that these groups are also essential in shaping the extent to which this value is appropriated by migrant firms, influencing their long-term growth potential. Indeed, the value creation process in migrant firms makes the firm and the stakeholders interdependent, generating a bargaining process in the value appropriation stage (Brandenburger and Stuart, 1996). On one hand, we anticipate that stakeholders will contribute to the value creation process to the extent to which they are adequately compensated for their efforts (Barney, 2018; McGahan, 2021). To better motivate this claim, it is useful to focus on the process through which rents are extracted and distributed at the firm level. While the original RBV approach effectively explains how economic rents are accrued by an organisation (Coff, 1999, 2010), it fails to describe how these rents are distributed among the stakeholders involved in the process (Barney, 2018; McGahan, 2021). This aspect is particularly relevant in the context of migrant entrepreneurship, especially when the firm engages in economic transactions with migrant stakeholders operating at the local level in the host country or when transnational networks are exploited in the migrant’s country of origin or in other countries visited before immigrating to the current destination country.

The rent distribution process is strongly influenced by two main factors: (1) the resource endowment of the migrant firm and (2) the bargaining power of the stakeholders involved in the negotiation, which is extremely heterogeneous and changes over time. Therefore, the outcomes of the negotiation process vary considerably in both space and time. At one extreme, there are cases where the migrant firm relies on VRIN resources and engages with stakeholders holding higher bargaining power. Such circumstances are typically associated with competitive regimes based on highly differentiated goods and characterised by competition on product quality and innovativeness. In such cases, consistent with a production in a team setting (Alchian and Demsetz, 1972), the firm and its stakeholders act as a coalition, pursuing their interests collectively (Brandenburger and Stuart, 1996). The interaction will not be influenced by power imbalances, leading to a non-polarised distribution of rents (high-road strategy for value appropriation). This approach fosters a self-reinforcing cycle where stakeholders increase relationship-specific investments, enhancing the migrant firm’s value creation process over time and leading to higher growth rates.

At the other extreme, when migrant firms generate economic rents by exploiting ordinary and abundant resources and stakeholders have high replacement costs and limited bargaining power, the transaction leads to a strongly unequal distribution of the economic rents (low-road strategy). This organizational model does not necessarily affect the amount of rents, which can be very high for the migrant firm in the short term. However, the presence of significant imbalances in terms of bargaining power may provide an incentive for the migrant firm to adopt cost-minimisation strategies that generate positive returns and value appropriation strategies penalizing the migrant stakeholders involved in the negotiation. In such circumstances, stakeholders will gradually decrease their relationship-specific investments, minimising their commitment to the value creation process or engaging in opportunistic behaviour (McGahan, 2021). The limited contribution by migrant and transnational stakeholders will eventually hamper the performance of the migrant firm in the long term, limiting its growth opportunities.

As emphasised by Kloosterman and Rath (2010), the recent evolution of migrant entrepreneurship has increasingly been characterized by high-road strategies in interactions with both co-ethnic and non-co-ethnic stakeholders. This trend is particularly evident in urban contexts and has been influenced by migration policies aimed at attracting high-skilled immigrants (Docquier and Marfouk, 2006). High-road strategies are observed not only in certain high-tech environments but also within individual firms (Villares-Varela et al., 2018) and across various sectors, including producer services (Kloosterman and Rath, 2010), food processing and catering (Basu, 2010). At the same time, low-road strategies remain widespread. Notable examples include crop pickers in Italy and Spain (Corrado, 2017), the garment industry in Prato, Italy (Dei Ottati, 2014; Ceccagno, 2015) and retailing and catering in the West Midlands, UK (Jones et al., 2019).

According to our theoretical model, migrant enterprises can choose among a spectrum of value creation strategies that are typically wider than those available for indigenous firms. The wide range of opportunities stems from the possibility to have preferential access to local co-ethnic and non-co-ethnic migrant stakeholders as well as transnational stakeholders, in addition to the standard interaction with the host country community. Migrant firms simultaneously cooperate with these stakeholders to create value and compete with them to appropriate it (Brandenburger and Stuart, 1996). While balanced transactions with these stakeholders might reduce the share of value appropriated by the migrant firm, such strategies increase the chances that stakeholders will contribute to the value creation process of the firm in the long term, ensuring innovation, knowledge acquisition and organizational growth. On the other hand, inward-looking exploitative value appropriation strategies may be detrimental in the long term, generating lock-in effects that confine the firm within static market segments characterised by excessive cost competition.

The first crucial set of interactions impacting the operations of most migrant businesses involves engaging with co-ethnic and non-co-ethnic migrant stakeholders in the destination country. The contribution of the former group in supplying labour, intermediate goods and services has been extensively explored in the migrant entrepreneurship literature (Masurel et al., 2002, 2004; Baycan Levent et al., 2003; Masurel and Nijkamp, 2004; Wang and Altinay, 2012). However, its importance has been questioned recently (Edwards et al., 2016), suggesting that migrant firms often draw support from diverse and ethnically mixed migrant communities and networks in the destination country, such as those based on religion, locality or sector. The migratory experience place migrant stakeholders and the migrant firm in the same outsider status, fostering similar outsider-established connections (Berwing, 2019).

Despite the varying perspectives, the relevance of both co-ethnic and non-co-ethnic stakeholders should be acknowledged. Empirical contributions in the literature have provided contradictory evidence regarding the impact of these networks of stakeholders on the performance of migrant firms. On the one hand, the presence of migrant ties in the host country seems to correlate with positive performances associated with lower information and coordination costs for the migrant firm (Den Butter et al., 2007). On the other hand, higher reliance on co-ethnic stakeholders in the destination country has been associated with lower performance levels among migrant firms (Ley, 2006; Sequeira et al., 2009; Brzozowski and Cucculelli, 2020). Various explanations have been provided about this contrasting evidence. According to Moghaddam et al. (2018), the effects depend on the characteristics of the local ethnic ties. While weak ties are more beneficial, as they provide access to new information that enhances migrant firms’ ability to recognize opportunities, strong ties are linked to negative effects on firm performance, as they restrict the flow of new information. Tata and Prasad (2015) claim that the extent to which co-ethnic ties in the host country are positive depends on the characteristics of the local immigrant community, namely, their capacity to provide support to the migrant firm through information and resources.

An important aspect that is overlooked by these empirical investigations is how the rent accrued through the transaction is distributed among the actors involved. The rent distribution framework proposed in section 2.2 provides an effective way to account for this aspect. Such framework is effective in explaining successful interactions between migrant firms possessing VRIN resources and local migrant stakeholders with high bargaining power as well as justifying unbalanced relationships that are a potential source of unequal rent distributions. For example, consider employer–employee relations: such interactions can generate unequal outcomes when the bargaining power of migrant employees is significantly reduced by the lack of alternatives in the labour market or by their precarious legal status. Exploitative attitudes towards migrant workers by migrant firms have been reported in several contexts, for example, among Chinese migrants in Chile (Liu and Olivos, 2019) and Italy (Dei Ottati, 2009) and among Korean businesses employing Latin American migrants (Kim, 1999). The strategy used by the migrant enterprise to interact with co-ethnic and non-co-ethnic migrant employees is crucial in determining the degree to which the migrant community is a source of sustainable competitive advantage for the migrant firm. Similar unbalanced dynamics might occur in buyer–supplier relationships when migrant stakeholders engage in relationship-specific investments that increase their exposure to hold-up problems (Schmitz, 2002).

In conclusion, the presence of migrant interactions in the destination country does not ensure that the exploitation of migrant firms’ resources will be performed following high-road standards. Indeed, when co-ethnic and non-co-ethnic relationships are used to engage in labour exploitation or to establish inward-looking informal relationships with migrant stakeholders, this might create a liability rather than an asset for migrant firms (Jones et al., 2006).

The second relevant set of interactions for migrant firms are those established with transnational networks of stakeholders, including clients, suppliers of goods and services and partner firms. This set of interactions has been consistently emphasised in the literature, underscoring how migrant firms frequently depend on robust economic and social networks in their country of origin (Portes et al., 1999, 2002) and in other countries visited during their migration experiences (Bagwell, 2015; Sommer and Gamper, 2018). These networks typically translate into commercial relationships, investment opportunities and production links with foreign partners (Schiller et al., 1992; Drori et al., 2009). Typically, transnational links are the result of past investments in social capital by the migrant entrepreneur or by migrant employees in their home countries or in other foreign countries. The exploitation of transnational social and economic networks represents a potential source of competitive advantage for migrant firms.

In contrast to the findings regarding the local network of migrant stakeholders, empirical studies on the connection between transnational networks and the performance of migrant firms have yielded more consistent results. Indeed, the presence of such networks tends to be more frequently associated with better performances for migrant businesses (Brzozowski and Cucculelli, 2020; Wang and Liu, 2015) as well as representing in some cases an important final end market for these firms (Morgan et al., 2021). In addition to direct effects, transnational networks determine knowledge spillover effects in the countries involved, fostering technological catch-up processes, as highlighted by the case of Silicon Valley in California (Saxenian, 2007) and the more recent case of the IT cluster in Tel Aviv (Schafer and Henn, 2018). Furthermore, firms with a greater share of migrant owners or partners are more likely to introduce new products and processes (Lee, 2015). Finally, transnational networks are found to be effective in triggering the adoption of higher value-added business functions, as reported by Dei Ottati (2009).

Despite the apparent one-way impact on the performance of migrant firms, the rent distribution framework remains a valuable tool for interpreting diverse distributional outcomes arising from the interactions between migrant firms and transnational stakeholders. The ostensibly positive performance results may obscure situations wherein transnational partners possess limited bargaining power, rendering them susceptible to exploitative strategies employed by migrant firms characterized by ordinary resources. For instance, subcontracting arrangements with transnational partners may encompass labour exploitation and the exploitation of lenient environmental regulations to curb production costs, thereby augmenting profits in the short term. Beyond creating imbalances in rent redistributions, these low-road strategies contravene ethical principles, generate significant negative externalities in the countries involved and pose the risk of detrimental reputational consequences for the firm. Conversely, by adopting high-road strategies, migrant firms can foster social and environmental upgrading practices among transnational stakeholders, differentiating themselves from indigenous competitors and exploiting a relevant source of sustained competitive advantage in the long term.

An important implication of theoretical framework introduced in the previous sections is the opportunity of overcoming the traditional paradigm of migrant firms based on Liability of Foreignness (LoF). The concept of LoF was initially introduced in the international business (IB) literature to describe a structural disadvantage that MNEs face and should overcome when operating in a foreign country (Zaheer, 1995). According to the resource-based approach, the LoF is associated with (a) difficulties in transferring VRIN resources from the country of origin to the destination country and (b) constraints that limit the possibility of combining these resources with those already present in the foreign country where the MNE operates (Cuervo-Cazurra et al., 2007).

The concept has been subsequently incorporated and adapted in the migrant entrepreneurship literature (Guercini, 2017), using the term Liability of Ethnicity (LoE). LoE describes the set of barriers and constraints that limit the process of immigrant enterprise creation and development (Jiang et al., 2016). However, both the LoE and the LoF paradigms can only partially explain the wide variety of migrant entrepreneurial experiences that can be observed in most developed and developing countries: not infrequently, migrants display higher entrepreneurial propensities than locals and represent an increasing share of the firm population in several manufacturing and service industries (Fairlie and Lofstrom, 2015; Kerr and Kerr, 2020). The widespread diffusion of immigrant enterprises in high-income countries supports the claim that the LoF can be overcome. Even when the LoF persists during the early stages of the migrant firm’s life, it does not necessarily turn into a structural feature of the firm throughout its entire life cycle. Indeed, this initial “handicap” can be progressively overcome (Lu et al., 2021).

The discussion put forth in this paper underscores the inadequacy of the concepts of LoF and LoE in accurately capturing the diverse experiences observed among migrant firms. In light of this, the main claim is that the literature on migrant entrepreneurship should align with the ongoing debate among IB scholars concerning MNEs. In a recent contribution, Lu et al. (2021) have proposed to overcome the theoretical paradigm based on the concepts of Liability of Foreignness and Liability of Outsidership, highlighting how the focus on structural disadvantages provides an inaccurate picture of MNEs. While on the one hand these firms often face barriers to legitimacy and struggle to establish links in the host country (Moeller et al., 2013), on the other hand MNEs can rely on significant advantages associated with their status as global players, which can be described through the concept of Assets of Foreigness (AoF) (Mallon and Fainshmidt, 2017). The AoF concept describes the set of tangible and intangible resources that MNEs acquire over time by exploiting the ongoing interactions between the parent firm and the subsidiaries located in foreign countries (Nachum, 2010). AoFs generate a number of benefits, associated, for instance, with the ability to identify market niches distinct from the dominant logic of the sectoral context (Kostova and Roth, 2002) or with the opportunity to process and exploit strategic knowledge more rapidly to trigger innovation processes (Sethi and Judge, 2009).

Following a similar logic, the theoretical framework proposed in this paper can be used to overcome a vision of the immigrant enterprise solely based on the presence of liabilities. In the case of the immigrant businesses, the concept of AoF can be associated with the set of entrepreneurial and firm-level resources that are accumulated, activated and revitalized by migrant firms throughout their existence. This complex set of resources can be enhanced through the multiple links migrant firms have with local co-ethnic and non-co-ethnic migrant stakeholders as well as with transnational stakeholders and by exploiting the opportunity structure in the host country. Migrant community resources can further enhance the AoFs as long as they are exploited by the immigrant enterprise as a tool to enhance innovation, knowledge acquisition and organizational growth (high road towards resource appropriation), rather than as a rent extraction tool to exploit migrant stakeholders (low road). Importantly, local migrant and transnational stakeholders as well as the opportunity structure in the host country, do not represent exogenous factors in our theoretical framework but are rather elements of a more complex endogenous setting that can be reshaped by the active role of migrant firms.

By integrating the RBV with the NST to explain migrant entrepreneurship, our paper makes three key contributions to the academic debate on this growing segment of the global firm population.

First, we advance the understanding of migrant entrepreneurship by combining entrepreneurial and firm-level resources, evolving theories that previously focused solely on entrepreneurial resources. Entrepreneur-based and mixed embeddedness theories have underscored the importance of entrepreneurial resources in shaping the structure of migrant firms (Portes and Bach, 1985; Kloosterman et al., 1999; Kloosterman and Rath, 2001). However, while these resources are crucial, particularly for smaller firms, they fall short in explaining the dynamics of more structured migrant businesses, which are an emerging feature of several developed countries (Azoulay et al., 2022). Moreover, although entrepreneurial resources play a vital role during the early stages of a migrant firm’s lifecycle, our model also explains how VRIN firm-level resources continue to drive opportunities and growth for migrant firms after their initial establishment. Second, we bring attention to the role of migrant and transnational stakeholders in the value creation and value appropriation processes within migrant firms, offering new insights into the importance of these economic actors in shaping long-term performance and growth. Ethnic-based theories have acknowledged the significance of these groups but largely confined them to the enclave economy (Wilson and Portes, 1980; Portes and Bach, 1985; Light et al., 1994). In contrast, our analysis demonstrates that especially when migrant firms adopt “high-road” strategies in the value appropriation phase, focusing on long-term sustainability rather than short-term gains, migrant and transnational stakeholders deepen their relationship-specific investments, increasing their commitment to the migrant firm. These investments further enhance the firm’s performance and foster long-term growth trajectories that extend beyond the confines of the ethnic enclave, expanding into broader markets. Third, our resource-based model challenges the traditional focus on LoF in migrant entrepreneurship, shifting the emphasis towards the AoF. This perspective highlights the advantages migrant entrepreneurs can leverage, drawing parallels with the international business literature, where the concept of AoF has been applied to multinational enterprises to underscore their strategic role in the global economy (Mallon and Fainshmidt, 2017). By applying this framework to migrant firms, we contribute to the growing discourse on the positive aspects of foreignness in international business, opening new avenues for research on how global migration influences firm performance. Our model is relevant for future theoretical and empirical research in the international business literature, aligning with recent discussions on how migration shapes the strategies of firms in the global marketplace (Hajro et al., 2023).

From a policy perspective, the proposed theoretical framework suggests that one-size-fits-all approaches towards migrant entrepreneurship do not necessarily represent the best solution to favour inclusion of these economic actors (Kloosterman, 2003). Public support towards migrant entrepreneurship has changed little in the last decades (OECD, 2021), failing to recognize the diverging patterns of organization and performance displayed by migrant firms in the global economy. Some commonly used measures to enhance entrepreneurial strategies can prove detrimental from a resource-based perspective. For example, policies aimed at encouraging migrants away from sectors with oversupply of entrepreneurs might prevent the realization of effective recombination strategies between migrant firms, migrant communities and the host environment. In this respect, indirect forms of support aimed at improving local and national institutions and facilitating social and economic inclusion of ethnic communities could prove more effective in generating valuable synergies between migrant firms and the external environment in which they are embedded. Additionally, initiatives aimed at raising the endowment of intangible resources and organizational assets, strengthening human capital and the skills of employees and entrepreneurs, extending transnational ties and encouraging the creation of businesses with a multicultural configuration should be encouraged. These policies could facilitate the exploitation of migrant firms’ internal resources, leading to significant increases in the innovation potential of individual entrepreneurial projects and generating positive spillover effects within the host community.