Corporate governance in immigrant-founded entrepreneurial firms: ownership heterogeneity and firm performance

ABSTRACT

Drawing from resource dependence theory and the faultlines perspective, this study examines how ownership heterogeneity affects firm performance in the understudied context of entrepreneurial firms founded by immigrants. We find that investment by venture capitalists (VCs) is associated with immigrant-founded entrepreneurial firms being less profitable during their infancy stage. Our results also reveal that the presence of a native-born co-owner has a negative effect on performance for these entrepreneurial firms. This study suggests that immigrant entrepreneurs be more cautious about the costs and benefits of seeking resources from VCs and partnering with native co-owners. Further, seeking capital from alternative sources and employing native talent and expertise in terms of business advisers or executive managers may be effective alternative approaches for immigrant entrepreneurs.

KEYWORDS:

• Corporate governance
• ownership heterogeneity
• resource dependence
• faultlines
• immigrant-founded entrepreneurial firms

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. This designation for race was based on the data available from the Kaufmann Foundation and because the Hispanic community is the largest ethnic minority community in the U.S.