Small Business Economics 34(3) pp 323-338

The over-representation of certain ethnic minority and immigrant groups in self-employment is, in common with other developed countries, a notable feature of the UK labour market. Compared to the substantial growth in self-employment in the 1980s, the 1990s saw overall self-employment rates plateau. Despite this, some minority groups experienced continued growth whilst others, particularly Chinese and Indian males and Pakistani, Bangladeshi and Chinese females, saw their self-employment rates decline. In this paper we use microdata samples from the 1991 and 2001 Censuses to investigate the dynamic and spatial patterns of ethnic entrepreneurship. Using decomposition methods we find that, for males from the Asian groups, changes in observable characteristics associated with an increasing proportion of second-generation individuals explain much of the decline in self-employment. This, which is also true of Chinese females, reflects in part the age structure and educational experiences of the second generation. The dynamics of Black male and Pakistani/Bangladeshi male and female entrepreneurship are less easy to explain. We also find that, while there is no evidence of self-employment being an “enclave” phenomenon, local economic conditions do affect rates of entrepreneurship for some groups, notably Pakistanis and Bangladeshis.