Immigration and Entrepreneurship

Policy Dialogue on Entrepreneurship, PDE

America’s heritage as a nation of immigrants is a source of tremendous economic strength, and current research confirms that immigrants who have been attracted to the U.S. for its pro-growth culture and excellent universities often stay and create valuable, fast-growing startup firms. High-skill immigrants in particular have two significant positive impacts on growth – first as critical engineering and science talent at U.S. companies and second as potential entrepreneurs of new U.S.-based companies. Despite the nearly universal bi-partisan support for high-skill immigration, the existing system of immigration into the U.S. has become a disaster. Visas and green cards are bureaucratic, the number of high-skill migrants to the U.S. is capped at an artificially low level, and security laws have made travel to the U.S. after 9/11 difficult. America now risks losing its attraction as a “brain magnet” in contrast to other nations that are reforming in order to compete for the critical resource known as human capital.


 

Why Immigration Matters

  • Immigrants are a vital source of science and engineering talent. The most significant constraint on new-venture growth is the difficulty finding and attracting highly skilled, entrepreneurial workers.1  In 2004, 50 percent of U.S. graduate students in engineering and 41 percent of graduate students in the physical sciences were foreign-born temporary residents.2  Microsoft founder Bill Gates is just one of many tech CEOs who have testified before Congress about America’s strategic need for higher levels of openness to immigrants with engineering and science skills.3
  • Immigrants start a disproportionately high number of new U.S. firms.4  For example, Indian immigrants were one-third of one percent of the U.S. population in 2000, but founded 6.5 percent of U.S. high-tech firms during 1995-2000.5  Of the firms started in the U.S. during 1995-2005, one-quarter had at least one immigrant key founder. In Silicon Valley, over half the startups had at least one immigrant key founder.6 
  • America is the leading nation in attracting entrepreneurial immigrants. For the past two decades, half of all immigrants who have more than a high-school education have come to the U.S. versus other industrial countries. But our quota-based immigration system hinders recruitment of skilled foreign professionals7  and has contributed to the decline in the number of foreign workers in STEM fields (science, technology, engineering and mathematics).8 

 

Immigrants’ Key Contributions to the U.S. Economy

  • Immigrants are more likely to be self-employed than native-born Americans.9 
  • In 2006, foreign nationals residing in the U.S. were inventors or co-inventors in 25 percent of international patent applications filed from the U.S.10 
  • The National Venture Capital Association (NVCA) estimates that since 1990 venture-backed firms owned by immigrants have created more than 400,000 jobs and represent a combined market capitalization of roughly $500 billion.11
  • In companies like Cypress Semiconductors and Microsoft, for every foreign-born engineer hired, 4-5 additional employees are hired in marketing, manufacturing, and other related areas.12


Pro-Growth Policy Action: An “Entrepreneurial” Immigration Policy

  • Grant permanent residency, and an easier path to U.S. citizenship, to immigrants who graduate from qualified U.S. institutions of higher learning with degrees in mathematics, engineering, or the sciences.13
  • Eliminate annual caps on H1-B visas.14  The standard U.S. policy should allow highly-educated workers unfettered work rights within the U.S. so long as a security check is cleared.

 

1  The Kauffman Foundation.  On the Road to an Entrepreneurial Economy: A Research and Policy Guide, Version 2.0 . 2007.

2  Meissner, Doris, Michael Fix, Deborah W. Meyers, Demetrios G. Papademetriou and Michael Fix.  Immigration and America's Future. A New Chapter . Independent Task Force on Immigration and America’s Future. Migration Policy Institute. 2006.

3  Gates, Bill.  Testimony before the Committee on Science and Technology, US House of Representatives . Microsoft Corporation. 2008.

4  Fairlie, Robert W.  Kauffman Index of Entrepreneurial Activity: National Report, 1996-2005 .
Ewing Marion Kauffman Foundation. 2006.

5  Wadhwa, Vivek, Ben Rissing, AnnaLee Saxenian, and Gary Gereffi. " Education, Entrepreneurship and Immigration: America's New Immigrant Entrepreneurs, Part II ." The Kauffman Foundation. 2007.

6  Wadhwa Vivek, AnnaLee Saxenian, Ben Rissing, and Gary Gereffi, " America's New Immigrant Entrepreneurs: Part I ." Duke Science, Technology & Innovation Paper No. 23. 2007.

7  Bartlett, David L. " U.S. Immigration Policy in Global Perspective: International Migration in OECD Countries ." The American Immigration Law Foundation, Immigration Policy Center. 2007.

8  Ashby, Cornelia M. " Higher Education. Science, Technology, Engineering, and Mathematics Trends and the Role of Federal Programs ." Testimony before the Committee on Education and the Workforce, House of Representatives. United States Government Accountability Office. 2006; Galama, Titus and James Hosek. “U.S. Competitiveness in Science and Technology.” RAND Corporation. 2008.

9  Meissner, Doris, Michael Fix, Deborah W. Meyers, Demetrios G. Papademetriou and Michael Fix.  Immigration and America's Future. A New Chapter . Independent Task Force on Immigration and America’s Future. Migration Policy Institute. 2006.

10  Wadhwa Vivek, AnnaLee Saxenian, Ben Rissing, and Gary Gereffi, " America's New Immigrant Entrepreneurs: Part I ." Duke Science, Technology & Innovation Paper No. 23. 2007.

11  Anderson, Stuart and Michaela Platzer. "American Made: The Impact of Immigrants and Professionals on US Competitiveness." 2006.

12  Brooks Masters, Suzette and Ted Ruthizer.  The H-1B Straitjacket. Why Congress Should Repeal the Cap on Foreign-Born Highly Skilled Workers . CATO Center for Trade Policy Studies. 2000; Gates, Bill.  Testimony before the Committee on Science and Technology, US House of Representatives . Microsoft Corporation. 2008.

13  The Kauffman Foundation.  On the Road to an Entrepreneurial Economy: A Research and Policy Guide, Version 2.0 . 2007.

14  Idem.

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