Immigrants A Driving Force Behind Innovative Firms, Study Finds

How many high-growth, high-tech firms are started by immigrants?

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Need more evidence that immigration contributes more to the economy than it takes away? The Small Business Administration Office of Advocacy just released a report on "High-Tech Immigrant Entrepreneurship in The United States." The study looked at a nationally representative sample of "rapidly-growing high-impact, high-tech companies" (defined as tech companies where sales have at least doubled in the past 4 years, and also has had sufficient employment growth). The authors find that 16 percent of these companies have at least one foreign-born immigrant as a founder. Over three-quarters of these founders are American citizens.

Why look at "high-growth, high-tech" firms only? They have a dramatically disproportionate impact on job growth and overall economic growth, two things we are especially interested in these days.

For instance, Acs and Mueller (2008) demonstrate that sustained economic benefits from entrepreneurship at the regional level derive mainly from young (two to five years old), medium-sized (20 to 499 employees) enterprises and not from small businesses in general or the establishment of branch plants of large firms. Haltiwanger (2009) provides evidence that companies that are less than five years old account for nearly all net job creation in the United States. Autio (2005) summarizes a variety of studies (including Wong, Ho, and Autio 2005) showing that 1-10% of new firms generate 40-75% of new jobs.

If our immigration laws made it easier for foreigners to become U.S. citizens, that 16 percent would likely be much higher, and as a corollary, there would more people to found these kind of firms. That's not taking a slice of the pie away from native-born Americans--that's expanding the size of the pie.

There are many reasons why immigrants would be more entrepreneurial than native-born Americans, and here's one of them from the paper:

The most commonly accepted distillation of the psychological element of entrepreneurial opportunity recognition is “alertness” (Kirzner 1973). Some people are on the lookout for opportunities, while others are not. This attribute seems to be passed down through families; the children of entrepreneurs are more likely than others to become entrepreneurs themselves (Lentz and Laband 1990). Immigrants may also be more “alert” in this sense than the average native-born person. Those who come to the United States for education or employment, for instance, have, at a minimum, recognized opportunities for personal achievement outside the borders of their native land.