Changes in policy attracted foreign entreprenuers to Sweden

Changes to the Swedish immigration policy led to greater numbers of foreign entrepreneurs coming to Sweden after 2008. Differences in income between Swedish and foreign entrepreneurs also fell during several years. These are the conclusions of a thesis recently presented at LiU.

Aliaksei Kazlou, researcher on foreign entrepreneurs immigrating to Sweden.

More liberal than the US

Swedish migration policy has been changed several times, and became in general significantly less liberal after the refugee crisis of 2015. However, a few years previously, in 2008, changes to labour immigration rules were carried out that made it easier not only to employ foreign workers but also to start a business in Sweden.

Entrepreneurs were now perfectly free to carry out operations in Sweden with the only condition being that they could support themselves and their family from the operation of their company. These regulations were more generous than those in both Canada and the US, two countries that otherwise have large numbers of labour immigrants.

“One aim of the reform was to attract foreign entrepreneurs to Sweden. This would, in turn, create jobs and growth”, says Aliaksei Kazlou, research fellow in business administration, who has studied the immigration of foreign entrepreneurs for several years.

Two different groups

In his thesis, Immigrant entrepreneurs in a changing institutional context: a mixed embeddedness approach, he investigates how the changes in the rules in 2008 influenced foreign entrepreneurs in Sweden. He uses the term “entrepreneur” in the thesis to describe not only innovators who create new companies in, for example, the ICT industry, but also owners of small businesses in more traditional fields. It should be noted that these two groups are not always easy to distinguish.

Aliaksei Kazlou in his office at LiU.

“I thought the difference would be quite clear, and this result surprised me. It turned out that in practice, an entrepreneur often belongs to both groups, depending on what they work with”, says Aliaksei Kazlou.

Two important results presented in the thesis are that the number of foreign entrepreneurs in the ICT industry increased after 2008, and that the earnings of foreign entrepreneurs also increased. And during this period, differences in income between Swedish and immigrant entrepreneurs fell. The explanation is what researchers call “self-selection”, which means, quite simply, that greater numbers of successful entrepreneurs and business owners emigrated to Sweden from other countries after 2008.

Thus, to the extent that the changes in the rules were intended to attract more foreign entrepreneurs, they were successful.

Differencies between immigrants

“At the same time, it’s difficult to know what caused what. Several other changes in the law were carried out that may also have had an effect, while Sweden and the rest of the world were at the same time hit by a severe financial crisis in 2008”, says Aliaksei Kazlou.

Three of the four articles included in the doctoral thesis concern differences between the periods before and after 2008. The fourth article examines the extent to which asylum-seekers and economic migrants wind up their own companies or maintain them in operation, and the differences between the groups. Asylum-seekers keep the companies in operation for shorter periods, while in both groups support from the family increases the probability of maintaining them in operation.

Aliaksei Kazlou also investigates in his research how other factors than legislation – such as social, ethnic and family networks, social capital, and the individual’s human capital – influence entrepreneurship. The most important conclusion of the thesis is, however, something else.

“This is probably how important it is to realise how heterogeneous this group is. Foreign entrepreneurs work in different industries, come from different countries, have different backgrounds and objectives... the differences are huge. This makes it extremely difficult to implement political measures that benefit all members of the group.”

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