Immigrants play a key role in entrepreneurship: In the United States, immigrants are 80 percent more likely to start a business than native-born Americans. More than half of the billion-dollar startups in the U.S. have roots in immigrant founders. Yet there is limited research on what factors influence where immigrants decide to start their companies.
In “How Immigration Policies Affect Startup Location Choice: Evidence from Canada’s Startup Visa Program” (NBER Working Paper 31634), Saerom Lee and Britta Glennon investigate the impact of Canada’s Startup Visa Program on the relocation decisions of immigrant entrepreneurs based in the U.S. Introduced in 2013, the program offers permanent residency to eligible immigrants and their families, with the goal of attracting individuals who will create jobs and start innovative companies that can compete globally.
Since the introduction of the Canadian Startup Visa Program in 2018, US-based immigrants are more likely to move to Canada to start their own businesses.
The study surveys a sample of 1,190,798 college-educated, non-Canadian entrepreneurs who lived in the United States before founding a startup in the United States or Canada between 2006 and 2021. Immigrants made up 26.1% of the sample, significantly higher than their share of the U.S. population at 14%. The researchers found that the Canadian Startup Visa program increased the likelihood of immigrants living in the United States founding a company in Canada by 0.048 percentage points, up from a baseline of 0.069%. This effect persists and grows over the 10 years following the program’s introduction.
Responses to the program vary across immigrant groups. Asian immigrants are more likely to immigrate to Canada and start businesses because of their longer wait times for U.S. work-based permanent residency and their higher representation in Canadian designated organizations and population shares. In 2021, Asians made up 20.2% of the Canadian population compared to 7.2% in the U.S. Conversely, Hispanic entrepreneurs are less likely to start companies in Canada. Hispanics make up 1.6% of the Canadian population compared to 18.7% in the U.S. These results support previous research showing that immigrants tend to settle in ethnic enclaves that can provide them with social capital, information about entrepreneurial opportunities, and access to potential employees, suppliers, investors, and customers.
Startups founded in Canada by immigrants who had previously resided in the U.S. have a slightly lower survival rate than companies founded by native U.S. or Canadians. After three years, roughly 73% of companies founded by immigrants who had previously resided in the U.S. survive, compared with 85% of companies founded by native Canadians. The lower survival rate could be due to factors including relocation costs, liabilities of being foreign, and differences between the Canadian and U.S. entrepreneurial ecosystems.
— Leonardo Vazquez
The researchers gratefully acknowledge funding from Wharton Analytics.
