Expatriate Entrepreneurs: A Unique Subset of Business Expatriates

Introduction

In a monograph* published online in 2017 (the printed edition that appeared in 2018), authors Jan Selmer, Yvonne McNulty, Jakob Lauring, and Charles Vance explored the distinguishing characteristics and contributions of an emerging category of business expatriates: expat-preneurs (expatriate entrepreneurs). After acknowledging that countries often attempt to facilitate entrepreneurial activity, the authors cited studies documenting how immigrant entrepreneurs – i.e., those who engage in international entrepreneurship (IE) – have a disproportionately positive economic impact in their host-country locations. In particular, they are more successful than native entrepreneurs in recognizing international opportunities.
The authors noted that precise definitions are necessary when researching international entrepreneurship because there are many different types of entrepreneurs in this domain. Some are immigrants intending to relocate to a country permanently with the intention of taking up citizenship, whereas others will remain expatriates – "expat-preneurs" – who will retain citizenship of their home country and only ever reside 'temporarily' in the host location. Each must be distinguished from the other to properly isolate the population of expat-preneurs for closer study. Further, an important part of this process is the task of identifying the personal and demographic characteristics of expat-preneurs. Without such information, we cannot understand their motivations or what distinguishes them from the other individuals who participate in the business-expatriate community.

Business Expatriates, Self-Initiated Expatriates, and Expat-Preneurs

To achieve a clearer understanding of the role played by expatriate entrepreneurs, the authors first define a various types of expatriate workers that fall within the broad category of business expatriates:

Business expatriates. The broadest category comprises all kinds of business expatriates. In all cases, however, they are legally working individuals who reside in a host country where they are not a citizen, and they seek to accomplish career-related goals. Beyond that, they can be relocated by their home-country organization as assigned expatriates (AEs), or they can initiate their own relocation (self-initiated relocation) by moving to the host country to be a direct employee of an organization already located or headquartered there. Additionally, the authors provide a brief history of business expatriates – distinguishing them from tourists, retirees, refugees, and others who reside in a host country without the essential business orientation.
Assigned expatriates (AEs). This type of business expatriate is sent abroad by an organization and typically resides in the host country on a temporary basis the length of which is determined by their employer.
Self-initiated expatriates (SIEs). Within the broad category of business expatriates is another group: self-initiated expatriates. They initiate and usually finance their expatriation and are not transferred by organizations (unlike AEs). They temporarily relocate to pursue cultural, personal, and career-development goals with no definite time frame in mind, but for typically much longer timeframes than AEs. These SIEs comes in many varieties.
- Localized expatriates (LOPATs). This group of SIEs – after completing a long-term assignment contract as an AE – transition fully to local terms and conditions in the host country. They do this at the direction of an employer or at their own request. They are employees of organizations.
- Permanent transferees (PT). This group of SIEs usually resigns from the home-country office of the multinational enterprise (MNE). Then they accept a position by the host-country office of the same MNE – accepting the local terms and conditions offered in the host country, with no repatriation or guarantee of company-sponsored reassignment elsewhere. Again, they are employees of organizations.
- Foreign executives in local organizations (FELOs). As company employees, they hold local managerial positions supervising host-country nationals in locations where the organization is headquartered.
- Expat-preneurs. These self-employed expatriate entrepreneurs are often mistaken as a type of immigrant entrepreneur but are, in fact, still expatriates. These are the fourth type of SIE that we will examine. They constitute the chief focus of this monograph. Moreover, they temporarily live abroad and initiate new international self-employment opportunities in a host country, but this can change.

Once the term expat-preneurs was identified, defined, and distinguished from other types of business expatriates and, more particularly, from other sub-types of self-initiated expatriates (SIEs), the authors pointed out the need for additional information about this group. First, despite evidence of their growing numbers, expat-preneurs receive far less attention than other types of entrepreneurs in the international entrepreneurship literature. The authors addressed this gap by examining empirical evidence, much of it based on information about entrepreneurship originating from developing countries. These data include information about migration flows, institutions, network dynamics, structural economic circumstances, and the underlying personal characteristics of the individual entrepreneurs such as career aspirations and socio-cultural influences.

Differences Between Expat-Preneurs and Other SIEs

The authors examined a sample of 325 SIE respondents; 268 were company employees (SIEs), and 57 were expat-preneurs. All of them originated in developed countries (including Germany, Denmark, Italy, and the USA), and they resided and worked in China, Hong Kong, and Singapore. The authors discovered that – although there are no differences between expat-preneurs and other SIEs in educational level, gender, and marital status – expat-preneurs are indeed different from other SIEs in a number of time-related characteristics. In particular, expat-preneurs were older, had higher positions within an organization, spent more time in the host location, were expatriates longer, and spent more time in their current jobs in the host location. In summary, they were more experienced and had more “street credibility” because of their deeper social connections in the host location.

The authors also hoped to discover if different sub-types of SIEs were used for different purposes as well as when and why SIEs might leave an organization to enter into self-employment.

Expat-preneurs do not intend to become citizens in the host country or to make it their permanent home. Like other kinds of SIEs, they perceive their stay in the host country as temporary. Moreover, SIEs (including expat-preneurs) believe that permanent residence in the host country would interfere with their “free agent” mentality to self-direct their career, particularly if new opportunities arise.
Age comes into play because expat-preneurs are more highly motivated by business and professional activities than younger SIEs, who often initiate expatriation because of curiosity and perceived opportunities for adventure (tourism, travel, backpacking) than career-development concerns. Again, the temporary nature of SIE assignments remains a key consideration.
Once again, both expat-preneurs and SIEs can be distinguished from assigned expatriates (AEs) because AEs are tied more to organizational and occupational constraints. Furthermore, AEs are more likely to wait for their organizations to arrange for appropriate international career opportunities than to take charge of their careers. In this way, AEs career orientation is more passive.
Expat-preneurs and SIEs tend to have more experience with the local host-country business environment. This makes both groups ideal candidates to pursue international entrepreneurship (IE) opportunities. Unlike immigrant entrepreneurs from developing countries, they do not intend to live in the host country permanently.

What Kind of People Are Expat-Preneurs?

Expat-preneurs possess a defining characteristic: recognition of their own self-agency in turning away from a traditional expatriate career within the confines of an MNC to focus on an entrepreneurial career. This includes a more flexible approach to career opportunities and a self-managing career perspective. Precisely when these individuals embark on the entrepreneurial adventure during their careers depends on the following factors:

the surrounding context in the host country (business and personal environment)
individual personality
the amount and quality of human capital and social resources available to them
the ability to sense and recognize local host-country opportunities
a proclivity for risk-taking (including a willingness to shoulder a decrease in dependable compensation)

The availability of appropriate human capital and social resources is particularly important for the immigrant entrepreneur who hopes to make a permanent home in the host country – whether these resource-ties are formed through marriage, friendships, or professional relationships. Taken together, and whether one is an immigrant entrepreneur, expat-preneur or another diaspora entrepreneur, the “entrepreneurial intention” of the individual comprises structural (i.e., the legal and economic environment), educational, and relational supports.

Additional personal characteristics of the expat-preneur include a good educational background (similar to other SIEs), more professional experience, specific technical knowledge, greater organizational experience (especially regarding effective business processes and practices), and more access to financial resources and collegial moral support. Particularly important is expat-preneurs' ability to initiate their own independent business development efforts. In effect, they are “opportunity entrepreneurs.” This distinguishes them from other SIEs and from “necessity entrepreneurs” (low-skilled migrants with few employment choices who are then pushed into entrepreneurial activity to earn a living).

Conclusion

Although the study encompassed only a small sample of non-Asian respondents and was based on self-reporting that was limited to three countries, the results were statistically significant. There is more work to be done, but we can say that business expatriates from developed countries build local economic vitality, enhance local professional practice, and strengthen the local labor skill base. An understanding of their contribution can affect national policies that can correspondingly impact positively on expat-preneurs. These policies will have to consider the underlying individual factors that influence international entrepreneurship – including career aspirations and socio-economic determinants.

* Note. This article summarizes the following monograph: Jan Selmer, Yvonne McNulty, Jakob Lauring, Charles Vance (2018), “Who is an expat-preneur? Toward a better understanding of a key talent sector supporting international entrepreneurship,” Journal of International Entrepreneurship, Vol. 16, Issue 2, pp. 134-149. Permanent link: https://doi.org/10.1007/s10843-017-0216-1