The Curious Indian Entrepreneur

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I attended a session from yesterday's Entrepreneurship and Growth Conference on "Indian Entrepreneurial Success in the United States, Canada, and the United Kingdom". RAND corporation's Krishna B Kumar attempted to explain the extraordinary successes of Indian expatriate entrepreneurs in these three countries, arguing that much can be attributed to observable differences such as education, family ties, and choice of sector.

In the United States, the typical Indian entrepreneur has an average business income that is substantially higher than the national average and is higher than any other immigrant group. Net annual income in the United States is 60 percent higher than the overall average. Meanwhile, in Canada and the UK, Indian entrepreneurs make similar incomes as other immigrants, but employ more employees than almost any other ethnic group.

What explains these differences? The authors attribute around 50 percent of this success to higher rates of education. For example, in the United States 68 percent of Indians have college degrees, which is twice the rate for whites. This is also true for Canada, where immigrants are largely admitted on a points based system that rewards higher education.

Other factors beyond education are also important: around 10 percent Indian entrepreneurial success is due to industry differences, such as the fact that Indian business are largely service-based, with very few participating in agricultural and construction sectors, which tend to produce lower returns. The authors also attributed some of these successes to the fact that 90 percent of Indian expatriate entrepreneurs are married.

While these three factors provide a logical explanation for these successes, the authors concede that many questions remained unanswered. For example, what roles do labor and credit markets, and institutions in general play in this matter? Cerberus paribus, would these entrepreneurs succeed in India if, say, its Doing Business score wasn't 131 out of 183? Does this study show that educated, married entrepreneurs, who work in the services sector in pro-business countries are more prone to success? Or, are Indian entrepreneurs in general successful when given the right business-friendly environment?

Mr Kumar and his colleagues may want to team up with the Subnational Doing Business team to find some answers to these questions.

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