Photo illustration of Databricks, an innovative billion-dollar company with multiple immigrants … [+]
New research shows that immigrants play a critical role in generating jobs, innovation and new business in the United States. The findings should be of interest to policymakers and Americans who care about expanding employment opportunities, especially in cutting-edge fields. The study highlights benefits of immigration that have been overlooked in the current political battle over U.S. border policy.
Immigrant Entrepreneur
Immigrant entrepreneurs receive little media attention, despite the impact foreign-born entrepreneurs have on a country’s economy. “Immigrants contribute disproportionately to entrepreneurship in many countries, accounting for a quarter of new job-creating businesses in the United States,” says a new study by economists William R. Carr (Harvard Business School), Sahil A. Choudabadia (University of Michigan), Sari Pekkala Carr (Wellesley College), and Louis J. Maiden (Harvard Business School). The study was published by the National Bureau of Economic Research.
The economists detail the impact of immigrant entrepreneurs: “Immigrants are over-represented as founders of innovative companies and high-tech industries,” they write. “In 2022, the four most valuable private ventures (SpaceX, Stripe, Instacart, and Databricks) had immigrant founders, as did three of the world’s 10 most valuable public companies (Alphabet, Nvidia, and Tesla).”
According to a study by the Foundation for National Policy Studies, 55% of American startups valued at $1 billion or more had at least one immigrant founder. Nearly two-thirds (64%) were founded or co-founded by an immigrant or the child of an immigrant. Nearly a quarter of billion-dollar American companies were founded by immigrant founders who came to the U.S. as international students.
The NFAP report concluded that immigrants founded or co-founded nearly two-thirds of the top U.S. AI companies (28 of 43, or 65%). The study looked at 43 U.S. companies: Forbes The AI 50 is a list of “the top startups developing the most promising business applications of artificial intelligence – companies with a compelling vision and the resources and technological means to make it a reality” (I authored both studies.) The economists cited the NFAP study in their comparative analysis paper.
According to the economists, “most of the growth in immigrant entrepreneurship in the United States has come through a broad-based strengthening of immigrant entrepreneurship across all states, rather than through specific booms in a few states.”
innovation
Immigrant entrepreneurs are innovative. Innovation often comes from starting a business that allows the entrepreneur to refine and develop a product or service to suit consumer tastes. The reasons for innovation can be unusual.
When Eric Yuan was a university student in China, he would commute 10 hours by train to visit his girlfriend. This experience inspired him to develop a video conferencing application to communicate with the young woman who would later become his wife. In the United States, he turned that idea into Zoom Video, which is now valued at $19 billion and employs more than 7,000 people.
After US authorities refused to grant Yuan a visa, he finally succeeded on his ninth attempt to come to the US. US immigration law does not provide for a business visa, so most entrepreneurs who move to the US first obtain permanent residency through family, employment or refugee status before starting their own businesses.
Carr, Chodabadia, Carr, and Maiden made a key finding: “Companies with immigrant owners are more likely to patent and have more patents per employee.” A study by Ufuk Akcigit and Nathan Goldschlag concluded that the share of immigrant inventors in the United States rose from 24% in 2000 to 35% in 2016.
“Immigrant-founded firms are 3.4% to 4.5% more likely to create new technologies and less likely to use other existing technologies,” Carr, Choudabadia, Carr, and Maiden write. “These findings suggest that across education and fields of study, immigrant entrepreneurs tend to have a stronger association with innovation.”
The economists say that “the innovativeness of immigrant entrepreneurs, particularly those in high-tech sectors, suggests a link between economic growth, labor adjustment, and the agglomeration effect of technology clusters.”
Some aspects of immigrant entrepreneurship remain a mystery. “There is still much to learn about immigrant entrepreneurship,” the study states. “First of all, we still have surprisingly little understanding of why immigrants are so entrepreneurial.”
Harvard Business School professor William Carr said the characteristics that lead people to immigrate, such as hard work and ambition, have something in common with becoming an entrepreneur.
Carr agrees that the U.S. economy would benefit if U.S. laws made it easier for entrepreneurs and international students to enter and stay in the U.S. “That’s true,” Carr says. “Immigrant entrepreneurs are a source of jobs for the U.S. economy and enable a dynamic economy. This is especially true in high-tech and growth-oriented sectors where the U.S. needs to stay on the cutting edge. Immigrant entrepreneurs are what made our country successful in the past and we need them in the future.”
