Why Entrepreneurship Needs Immigrants
How important are immigrants to the entrepreneurial landscape? Given the furor around changing the visa requirements for even the most skilled immigrants, you might think this would be a tough question to answer.
It's not. Instead, it's abundantly clear that entrepreneurs and those who support them have an unusually high stake in immigration reform. Allowing skilled immigrant entrepreneurs to more easily enter America, where they can create good jobs and pay taxes, is the closest thing to an economic free lunch that we are likely to get. In the words of New York Mayor Michael Bloomberg, we are committing "economic suicide" by making it hard for skilled immigrants to stay in the U.S. and contribute to our economy.
After all, can you imagine an American economy without a Google or a Sun Microsystems or without a SpaceX? What if there had never been a Carnegie Steel, a Bell Telephone (later AT&T), or a Pfizer? All of these companies were founded by immigrants, and all have left a distinct mark on entrepreneurship and the American economy. Immigrants have been key to the success of entrepreneurship (and to Silicon Valley, in particular), to job creation, and to innovation in the U.S.
Natural Risk Takers
Part of immigrants' entrepreneurial success stems from the simple fact that they're more than twice as likely as native-born Americans to start companies, according to the Ewing Marion Kauffman Foundation. An analysis of 2010 U.S. Census data by the Fiscal Policy Institute found that immigrants comprised 18% of small-business owners in 2010, even though immigrants make up only about 13% of the population.
Because immigrants start a disproportionate number of businesses, it's likely that they are driving a disproportionate share of new-job growth as well. No matter who founds them, new businesses account for 65% of all net new jobs, according to the Bureau of Labor Statistics. And some 40% of companies on the Fortune 500 were founded by first-generation immigrants or their children, according to a 2011 study by the Partnership for the New American Economy. That study found that those companies had revenue of more than $4.2 trillion and employed more than 10 million people worldwide.
Immigrants & Silicon Valley
But it's in Silicon Valley--a driver of start-up growth and innovation worldwide--that immigrant entrepreneurs have arguably made their biggest and most concentrated impact. In a 2007 survey we conducted, first-generation immigrants were on the founding teams of roughly 52% of all tech companies in Silicon Valley.
Immigrants are on the founding teams of nearly half of VentureSource's top-ranked venture-backed companies, according to a 2011 study conducted by the National Foundation for American Policy. That study found that immigrants were key members of the product or management teams in more than 75% of those companies.
Although launching companies may be immigrants’ most direct contribution to entrepreneurship, those such as Sophie Vandebroek have also been crucial in continuing innovation once companies are off the ground. A native of Belgium, Vandebroek is chief technology officer and president of the innovation group at Xerox. She is named on 12 patents, has been inducted into the Women in Technology Hall of Fame, and is a fellow of the Institute of Electrical and Electronics Engineers (IEEE).
Thanks in great part to immigrants such as Vandebroek, the United States has dominated global patent filings for the past 60 years. In 2007, our team analyzed the World Intellectual Property Organization database and found that the contribution of noncitizen U.S. immigrants to these international patent applications increased from 7.3% in 1998 to 24.2% in 2006.. A June 2012 report by the Partnership for the New American Economy found 76% of patents awarded to the top patent-producing universities in 2011 had at least one foreign-born inventor.
Where were foreign-born inventors most prevalent? In cutting-edge fields such as semiconductor device manufacturing, where 87% of patents named an immigrant inventor; information technology, where 84% of patents named an immigrant inventor; and pulse or digital communications (83%). Pharmaceutical drugs and drug compound patents were close behind (79%), followed by optics (77%).
Unfortunately, difficulties in obtaining visas are forcing many founders and innovators to either delay their start-up dreams or to relocate to more hospitable countries. Since 2005, the percentage of Silicon Valley start-up teams that include an immigrant co-founder has dropped to 52% from 44%, according to the Kauffman Foundation.
While researching our book, The Immigration Exodus, we found, perhaps surprisingly, that most of the entrepreneurs prevented from launching their companies in America still had a strong desire to try again. In another column, we discuss simple policy changes that would let them, and others like them, do just that.
VIVEK WADHWA | Stanford, Duke & Singularity University
Vivek Wadhwa is Vice President of Academics and Innovation, Singularity University; Fellow, Arthur & Toni Rembe Rock Center for Corporate Governance, Stanford University; Director of Research, Center for Entrepreneurship and Research Commercialization and Exec in Residence, Pratt School of Engineering, Duke University; and Distinguished Visiting Scholar, Halle Institute of Global Learning, Emory University.