Linguistic distance and entrepreneurship of migrants: Evidence from China

Abstract

This study examines how the linguistic distance between migrants’ cities of origin and destination affects their entrepreneurial activities. Utilizing data from the China Migrant Dynamic Survey in 2017, we find that the likelihood of migrants’ entrepreneurial activities in destination cities initially increases with linguistic distance and then declines. This inverted U-shaped relationship emerges from two opposing effects. A modest linguistic difference helps migrants identify business opportunities. We show that migrants from regions with distinct culinary traditions are more likely to start a business in the catering industry to meet the demand for their home cuisine. A longer linguistic difference also introduces difficulties for migrants in adapting to social norms and creates barriers to build social ties and trust. Our findings suggest that promoting a moderate cultural diversity in a region may help stimulate entrepreneurial vitality. (JEL: J15; J61)