Intra-community fraud among UK and German expatriate entrepreneurs in Spain: a trust and social networks-based explanation

In a recent comparative study undertaken in 2006, the author investigated the business strategies of German and UK emigrant entrepreneurs based in Spain, with particular attention to their risk mitigation strategies and the role of trust and social networks in mitigating risks among these expatriate groups (see Wilson-Edwardes and Hoecht, 2008). While undertaking our empirical research, the author was alerted by interviewees and desk research of the substantial amount of intra-community fraud that takes place among UK and German emigrant entrepreneurs in Spain. This observation had not been anticipated when the initial research was started, but it was later found that intra-community fraud within the German and UK expatriate communities in Spain is now such a wide-spread phenomenon that it has been featured in German media (for example 3 SAT, 14 July 2006), and to a lesser extent in UK media. During the empirical research, it was found that almost all of the interviewees reported such intra-community fraud and all of the key informants (solicitors, accountants and business advisors) reported such incidences. This chapter attempts to provide an explanation for the significant amount of fraud that occurs within both nationality groups of entrepreneurs in their host country using a trust and social networks analytical framework derived from relevant literature for this purpose. The key research aims for this paper are twofold: a) to identify whether there is a link between the risk mitigation strategies of different types of expatriate entrepreneurs that were identified in the original research and their likelihood of falling victim to intra-community fraud; and b) to identify under which conditions and to what extent the effective use of social networks can make expatriate entrepreneurs less vulnerable to this type of fraud.