Living with family: An entrepreneurial advantage?

Editor’s note: This post was republished with permission from the Ewing Marion Kauffman Foundation’s Growthology blog.

The economic contribution of immigrant entrepreneurs is undeniable. Immigrants are twice as likely as native-born Americans to become entrepreneurs.  In fact, a recent study finds immigrants have started more than half (44 of 87) of American companies that are valued at $1 billion or more.

But what makes immigrants more likely to become entrepreneurs? One possibility is that immigrants, who have taken the risk of leaving their home country for a new experience, might be less risk adverse than their native-born counterparts. Those who are more willing to take the chance of moving to a new country might also be more attracted to a risky venture like entrepreneurship.

Another potential explanation I would like to explore is the relationship between immigrant entrepreneurs and their propensity to live in multigenerational households. According to a 2011 Pew Research Center report, 15.6 percent of native-born people live in multi-generational households, while 24.6 percent of foreign-born people live in a multi-generational household. Immigrants in previous generations also relied on multigenerational living. The trend isn’t new, but it may provide an advantage.

The Family Advantage

For some immigrants, multigenerational living is a way to save money and concentrate assets. In addition, multigenerational living is often a cultural tradition that is maintained after immigrating to the U.S. While entrepreneurship can be risky, multigenerational living can help collectivize this risk.

According to Pew Research Center, multigenerational living does have an economic impact, particularly for immigrants.

“Immigrants also seem to have more income at their disposal when residing in multigenerational households. The median size-adjusted income of multi-generational households with foreign-born heads was 20% higher than other households in 2009, $55,045 vs. $45,782.”

In addition, multigenerational living provides benefits like reducing the cost of living, and it also can help reduce other costs like child care and save time in reducing household chores. As research has shown, work-life balance remains an issue for entrepreneurs. Multigenerational living arrangements can help relieve some of the personal responsibilities that entrepreneurs struggle with and allow them the opportunity to concentrate on their businesses with the help of their family structure.

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Emily Fetsch | Courtesy of the Ewing Marion Kauffman Foundation
Emily Fetsch | Courtesy of the Kauffman Foundation

Emily Fetsch is a research assistant in Research and Policy for the Ewing Marion Kauffman Foundation, and assists in the processing of new grants including grant research, grant write-ups, setting deadlines, and reviewing financials. She also assists in writing literature reviews and informative briefs, and conducts quantitative and/or qualitative analysis on the economy, policy, and entrepreneurship.

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