How deep are immigrant entrepreneurs in Germany asleep? A dynamic model of adjusting beliefs

The aim of the current study is to measure to what extent do immigrant entrepreneurs in Germany rely on past experience when taking decision about their business ventures, and to what extent do they utilise new information about their economic performance to learn about their true (but unknown) abilities and trading environment. The answers of the above-stated questions imply an answer to the underlying composite issue: 'How important is learning for the entrepreneurial success?' that we seek to examine both theoretically and empirically in this paper. We estimate the econometric model using data over the period 2000-2001 from the German Socio-Economic Panel (GSOEP). The main finding suggests that on average immigrant entrepreneurs adjust their expectations of unobserved productivity in the light of new information by around 72.5 per cent whereas German entrepreneurs are slightly asleep compared to immigrants. This implies that immigrant entrepreneurs do exploit new information, and they give much more weight to present experience when forming their expectations. Finally, the empirical analysis has revealed that utilisation of new information by entrepreneurs in Germany is extremely fast and not modest at all, and this fining appears to hold across a variety of distinct entrepreneurial groups.