Immigration and Entrepreneurship: Executive Summary

US Immigration policy is harming the primary driver of wealth creation in our country: entrepreneurship.

by Eric Ries

America is in danger of losing its competitive position as the pre-eminent country for innovation and prosperity. Entrepreneurship, the primary engine of our prosperity in the last two decades, is endangered by our immigration policy, which makes it very difficult for some of the brightest and most motivated individuals to stay in our country. Unless we take steps to rectify this situation, we risk a “brain drain” that can severely impact the long-term competitiveness of the United States in the global economy [7].

Research by preeminent scholars at universities such as Harvard, Duke and UC Berkeley has convincingly shown the contribution of immigrants to our economy. Nowhere is this impact more dramatic than in the technology and engineering industry. For example, over 25% of the technology companies founded between 1995-2005 had a key immigrant founder. These companies produced over $52 billion dollars in sales in 2005, and employed 450,000 workers that year. Similarly, 24% of all the international patents filed in the US in 2006 had a foreign resident as inventor or co-inventor [6][2].

While work by these scholars has demonstrated the positive impact of immigrant founders on our economy, our immigration policy actively discourages this trend. Designed primarily to introduce high barriers to illegal entry into the country, these laws make it difficult for highly qualified individuals, including ones that we train at some of our best institutions, to stay in the country. Lack of visas for entrepreneurs, restrictive visas that tie immigrants to employers, and long wait times for permanent residency (up to 10 years) leave many no option but to return to their home country to start their ventures [5][3]. These are often some of the brightest and most well trained members of our workforce. For example, over 50% of immigrants returning to India and China in recent years have advanced degrees (masters and PhDs), many were educated in the United States, and as a group are statistically likely to start new companies [1][4].

Legal reforms that encourage entrepreneurial immigrants to stay in our country are key to ensuring our global competitiveness. While immigrants make up only 12% of the US population, they constitute over 24% of our science and technology workforce, over 47% of our science and technology PhDs, and have founded iconic companies like Google, Yahoo, eBay and Intel. Startups are the lifeblood of our economy: they account for nearly all the net job growth in the US over the last two decades [8][9]. Unless we take active steps to encourage our smartest, most creative, and most motivated immigrants to start companies in our country, we risk losing unprecedented wealth creation and economic prosperity to other nations.

References

[1] Fairlie, Robert W., Estimating the Contribution of Immigrant Business Owners to the U.S. Economy. Research Report, Santa Cruz, CA: Small Business Administration Office of Advocacy, 2008.

[2] Saxenian, AnnaLee. Silicon Valley’s New Immigrant Entrepreneurs. Library of Congress Cataloging-in-Publication Data, 1999.

[3] Wadhwa, Vivek. America’s Immigrant Brain Drain. March 5, 2009.  (accessed October 12, 2009).

[4] Wadhwa, Vivek. Immigrants are more likely to be entrepreneurs. November 25, 2008.  (accessed October 12, 2009).

[5] Wadhwa, Vivek. The Reverse Brain Drain. August 22, 2007.  (accessed October 12, 2009).

[6] Wadhwa, Vivek, AnnaLee Saxenian, Ben Rissing, and Gary Gereffi. “Skilled Immigration and Economic Growth.” Applied Research in Economic Development 5, no. 1 (May 2008): 6-14.

[7] Wadhwa, Vivek, AnnaLee Saxenian, Richard Freeman, and Salkever Alex. Losing the World’s Best and Brightest. Research Report, Ewing Marrion Kauffman Foundation, Ewing Marrion Kauffman Foundation, 2009.

[8] US Census Bureau. Business Dynamic Statistics.  (accessed October 12, 2009)

[9] Ewing Marion Kauffman Foundation. Business Dynamic Statistics: Tracking Annual Changes in Employment for Growing and Shrinking Businesses.  (accessed October 12, 2009)

7 responses to “Immigration and Entrepreneurship: Executive Summary

  1. Have recently been laid off from a Technology company I would love the opportunity to work for a start up and I don’t need a visa. I was laid off due to my company sending work to China, so I think more should be done for people here that are looking for work in the Technology industry instead of bringing more people in.

  2. Great post Eric. Excellent summary. I wonder if a Founder is already in the US and already has a Visa, does that make a difference when he goes to transfer that Visa to a startup? Also I wonder if a foreign founder is seeking funding for a new startup, is the mere fact that they are a foreigner a show stopper from an investors point of view.

    To me this issue of not allowing a funded founder a visa is mind boggling and so counter to the entrepreneurial immigrant underpinnings of the whole US economy today. If this policy had been in effect in our grandparents time, the US would still be a third world country.

  3. Tim:

    You are missing the point here of this visa. This is not about making it easier for people from China, India, etc to get a work visa for an existing company in the US and thus potentially take a job from an American. Its not going to affect the transfer of work offshore in any way which is a function of the normal competitive landscape and standard business practice. What this is about is allowing a foreigner to come to the US, backed by investors (Angels, VC’s, etc) to start a company. If that person comes and starts his company he is going to create jobs (the workers are most likely to be Americans).

    In every post about this Visa, people always seem to go off about Americans losing jobs to H1 visa holders, etc. While I feel for those effected, that is not what this is about. If you want more jobs in technology for Americans you should be strongly in favor of this visa. Just look at the stats Eric gives. Foreign founders are as likely if not more likely to create a large tech company these days in the US thus creating jobs for more american technology workers.

    Without this visa, more companies will be created outside the US that could have been here, which will in turn result in more jobs and business going elsewhere thus exacerbating the problem you are concerned about, which is the lack of available tech jobs in the US.

  4. In the tech industry. Trying to start a couple businesses of my own but it’s quite slow (mainly due to all the jobless people in my community who are shying away from spending on new technology).

    My mission is simple. I will launch as many businesses as I can until I’m too old and too tired to do so. They will grow. They will get big. They will be governed with some simple laws, one of which will be to make US jobs (again as many as possible).

    Should I be fortunate, and become a millionaire – I will send lobbyists to ban outsourcing. I will do Search & Recovery on American Assets overseas. If Americans are starving and their Assets can’t be brought home, then scuttle them and let the enemy feel the same hunger they inflict.

    American business interests have long forgotten about the heaping rewards that come from a strong industrial backbone and gross production base.

    No proclaimed “super power” can possibly be got by the balls by the likes of China and India.

  5. Pingback: Why 2K? « Immigration Meditation

  6. i am an F-1 student in texas. i have alot of start-up ideas and want to execute them but as an f-1 am not allowed to do business. My idea will create alot of jobs and bring money to the economy. I am really confused.

  7. This program perhaps would be the most ambitious US immigrant policy issue since the row over immigration laws in the US assumed a more controversial dimension in both houses – Senate and House of representatives. I find this very creative and progressive in every sense than radical.
    This would not only help the US Economy, but would also help the prospective immigrant recognize the need to add value from day one rather than depend on it.

    At this time, the US economy is in dire need of a program such as this giving the recession and weight of the unemployment benefits and social security, making an already bad situation even worse.

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