The Making of Entrepreneurship: Does Language Ability Matter?

Abstract

Business ownership and self‐employment constitute a vital part of the economy. Entrepreneurs can provide employment for themselves and others. While many of the determinants of entrepreneurship have been intensively studied, the link between language ability and entrepreneurship has not. Using the Chinese Migrant Population Data from 2013 to 2014, this paper studies the importance of language ability when immigrants choose to become entrepreneurs. As a unique regional verbal form, dialect is an important channel to show one’s identity. Acquiring the local dialect increases entrepreneurial prospects by helping immigrants build their social network, enhancing their social identity, and reducing barriers to starting a business. We find that immigrants who can understand and fluently speak the local dialect are more like to become entrepreneurs. The effect of language on entrepreneurship is more pronounced in the urban fringe, towns and rural areas, and especially where individuals migrate across different dialectal regions. Gaining local dialect skills positively influence the decision to become either a necessity or an opportunity-driven entrepreneur. This paper reveals the impact of the dialect on startup activities, and it has important implications for immigrant’s employment decisions.

Keywords: Language Proficiency, Dialect, Entrepreneurship, Migrants, China

JEL Classification: M13, M21