A Structural Equations Model for Assessing the Economic Performance of High-Tech Ethnic Entrepreneurs

In this paper we develop and test a conceptual model of the key relationships concerning the business performance and success of ethnic entrepreneurs. To that end, an explanatory modei'GALAXY' is presented which serves as a framework for mapping out the impact that various background factors are assumed to have on the economic performance of ethnic entrepreneurs active in the high-tech sector in four big cities in the Netherlands. The model describes the behavioural and other factors which are grouped into four components: Motivational Factors; Socio-economic Contextual Factors; Policy Factors; and Business Environment. After a first examination of the relationships using ordered logit modelling, the resulting structural equation model is tested by using the AMOS software. The information base of our research comes from a set of extensive survey questionnaires administered to migrant and native entrepreneurs in Amsterdam, Rotterdam, Utrecht and The Hague. With the help of these data, a series of hypotheses on the relationships between the above-mentioned four components and individual firm performance is tested, with particular reference to the success conditions of ethnic entrepreneurs in the high-tech sector. Our structural equation model shows that three of the eight hypothesized paths were statistically significant. Of the three significant paths, only the paths between social networks and pull factors had the direction predicted, while current business location and Business Performance showed a reverse relationship.