<i>“Try to keep them dumb and under the thumb</i> ”: exploring the “darker side” of psychological contracts in “overly embedded” immigrant enterprises

Purpose This paper investigates the employment dynamics of immigrant enterprises by examining psychological contract (PC) relationships between immigrant entrepreneurs (IEs) and their workforce within immigrant enclaves in Northern England. By integrating psychological contract theory (PCT) with the mixed embeddedness framework, the study explores how informal employment relationships lead to inadvertent PC violations and their operational and competitive consequences. Design/methodology/approach A qualitative approach was adopted using semi-structured interviews that were conducted with 43 Pakistani IEs and 68 employees between March 2022 and August 2023. The data were analysed using template analysis, allowing for a structured examination and comparison of themes and patterns across participants’ narratives. Findings The study reveals distinct PC dynamics, illustrating how different relationship “types” within immigrant enterprises are related to varying competitive and operational risks. Kinship-based relationships foster loyalty but introduce operational risks related to role misalignment and limited skill development. Second-level relatives pose the highest competitive threat by leveraging their positions for skill acquisition and future competitive behaviour. Co-ethnic employees present moderate competitive risks, often exhibiting counterproductive behaviours or leaving to start their businesses. Non-co-ethnic employees, though rare, pose the lowest competitive threat but can introduce legal and compliance risks due to transactional PC breaches. These findings illustrate the complex interplay between relationship types, competitive pressures and operational stability within immigrant enterprises. Practical implications This study offers practical implications for IEs, business support agencies and policymakers. Immigrant entrepreneurs are encouraged to formalise employment practices by defining roles and expectations to reduce misunderstandings and operational risks. Business support agencies can provide training on compliance, financial management and formal business practices, helping immigrant businesses achieve sustainability. At the policy level, increasing access to business mentoring and financial support can foster structured management approaches within immigrant enterprises, thereby enhancing their contributions to local economies and reducing competitive tensions within immigrant enclaves. Originality/value This study uniquely combines PCT with the mixed embeddedness framework to provide a nuanced perspective on immigrant entrepreneurship within Northern England’s immigrant enclaves. By focusing on the unintended consequences of over-embeddedness, this research challenges the traditional view of ethnic networks and social capital as uniformly beneficial, illustrating how excessive reliance on informal agreements can undermine business sustainability. The study highlights the importance of formalised management practices, offering new insights into the discourse on immigrant entrepreneurship theory and practical implications for workforce management within ethnic enclave enterprises.