Caught in the middle: immigrant entrepreneurship and the costs of diversifying beyond the enclave market

Immigrant entrepreneurs operating ethnic-based ventures increasingly seek to broaden their customer base beyond co-ethnic markets, anticipating benefits for venture viability and growth, access to resources, and cultural bridging and belonging in the host society. Yet these anticipated benefits often remain deferred. Drawing on qualitative interviews with 30 first-generation immigrant entrepreneurs in Australia, this study examines what unfolds when entrepreneurs serve both co-ethnic and mainstream customers simultaneously. We show that operating at this enclave-mainstream interface exposes entrepreneurs to incompatible customer expectations. Co-ethnic customers emphasize authenticity and culturally embedded business norms, while mainstream customers prioritize localization and conformity with operational standards. Because these evaluative criteria operate simultaneously on the same venture, the same adaptation that satisfies one customer group tends to alienate the other, producing what we conceptualize as integration friction. This friction generates unintended consequences at both the individual level, including psychological distress and social marginalization, and the venture level, including customer loss, revenue instability, reduced resource accessibility, and a scaling back of opportunities and innovation. We contribute to research on immigrant entrepreneurs’ breakout strategies and acculturation experiences by theorizing diversification as an audience-contested process whose returns are contingent on the intensity of incompatible customer expectations.