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January 16, 2007
Immigrants Become Founding Fathers
Foreign-born entrepreneurs were behind one in four U.S. technology and engineering startups over the last decade, according to a new study on the effects of globalization on the U.S. economy. The findings offer new information into the debate over foreign workers and specialty visas.
Before 1882, anyone could move to the United States. As the population grew, however, the federal government decided to control immigration. Throughout most of the 20th century, the federal government fine-tuned its immigration policies to answer specific concerns of its citizens.
In recent years, an increasing number of Americans have come to believe that immigrants are overwhelming the country, particularly when it comes to jobs. In all of the heated debate over foreign workers and visas, the immigration issue is often painted with one broad stroke.
A new study, released last week, throws new information into the debate over foreign workers who arrive in the U.S. on such specialty visas.
The report, based on telephone surveys with 2,054 companies and projections by researchers at the University of California at Berkeley and Duke University, says about 25 percent of the technology and engineering companies launched in the U.S. in the past decade had at least one foreign-born founder.
Immigrants were most likely to start companies in the semiconductor, communications and software niches; they were least likely to enter the defense sector. California led the nation, with foreign-born entrepreneurs founding 39 percent of startups, compared to 25 percent of the state's population. In New Jersey, 38 percent of tech startups were founded by immigrants, followed by Michigan (33 percent), Georgia (30 percent), Virginia (29 percent) and Massachusetts (29 percent).
An introduction to the report asserted that debate over "unskilled" illegal immigrants has clouded the importance of immigration on the U.S. economy.
"Overlooked in the debate are the hundreds of thousands of skilled immigrants who annually enter the country legally," the report reads.
The study, which comes nearly eight years after an influential UC-Berkeley report on the impact of foreign-born entrepreneurs, notes that, of an estimated 7,300 U.S. tech startups founded by immigrants, 26 percent have Indian founders, CEOs, presidents or head researchers. Indian immigrants founded more tech startups from 1995 to 2005 than people from the four next biggest sources — United Kingdom, China, Taiwan and Japan — combined.
Further, Indians emerged as the dominant entrepreneurs in Silicon Valley. In AnnaLee Saxenian's 1999 study, Chinese immigrants dominated. Saxenian, now dean of the School of Information at UC-Berkeley, was also co-author of the new study.
Immigrants' contributions to corporate coffers, employment and U.S. competitiveness in the global technology sector offer a counterpoint to the ongoing political and industry debate over immigration and the economy, which largely centers on unskilled, illegal workers in low-wage jobs.
"It's one thing if your gardener gets deported," said the study's lead author, Vivek Wadhwa, a Delhi-born former technology executive who immigrated from India with his family as a young man. "But if these entrepreneurs leave, we're really denting our intellectual property creation."
In fact, tech industry lobbyists have already cited the study in a push to persuade Congress to increase the annual allotment of H-1B visas, which allow U.S. companies to sponsor temporary workers in specialty occupations such as computer programming and systems analysis. The companies say they cannot find enough Americans to fill jobs; other proponents contend that globalization requires U.S. companies to import talented workers.
"This research shows that immigrants have become a significant driving force in the creation of new businesses and intellectual property in the U.S. — and that their contributions have increased over the past decade," wrote Wadhwa.
Saxenian said the research debunks the notion that immigrants who come to the U.S. take jobs from Americans, as the report found that immigrants — mostly from India and China — helped start hundreds of companies in the U.S., generating $52 billion in sales and employing 450,000 workers in 2005.
"The advantage of entrepreneurs is that they're generally creating new opportunities and new wealth that didn't even exist before them," Saxenian said. "Just by leaving your home country, you're taking a risk, and that means you're willing to take risks in business.
"You put them in an environment that supports entrepreneurship, and this is the logical outcome."
Last year, the industry raised the issue in the national debate over immigration reform, but Congress ended its session without acting on the Securing Knowledge, Innovation and Leadership Act.
The bill would increase the annual quota on the H-1B visas to 115,000 from 65,000, eliminate green-card caps for some advanced-degree holders and streamline the processing of employment-based green cards. Tech lobbyists want to revive it.
It is unknown how many of the immigrants who founded technology companies had H-1B visas.
The study also looked at founders of engineering and technology companies started from 1995 to 2005, and analyzed the World Intellectual Property Organization Patent Cooperation Treaty database. The researchers found that foreign-born inventors living in the U.S. without citizenship accounted for 24 percent of patent filings last year, compared with 7.3 percent in 1998.
Without permanent citizenship, inventors are more likely to take valuable intellectual property elsewhere — and U.S. companies would have to compete with them, Wadhwa said.
"The bottom line is: Why aren't these people citizens?" Wadhwa said. "We're giving away the keys to the kingdom. This is a big, big deal once you figure out what this means for us competitiveness."
The report concludes by suggesting that understanding the importance of skilled immigrants in the U.S. economy is essential to "maintaining U.S. competitiveness in a global economy."
Resources
America's New Immigrant Entrepreneurs
by Vivek Wadhwa, AnnaLee Saxenian, Ben Rissing, Gary Gereffi
Duke University - Master of Engineering Management, Jan. 4, 2007
Skilled, Educated Immigrants Contribute Significantly to U.S. Economy
Duke University, Jan. 3, 2007
I-School Dean AnnaLee Saxenian assists with immigrant entrepreneurs study
by Kathleen Maclay
UC Berkeley News, Jan. 4, 2007
Immigrants behind 25 percent of startups
by Rachel Konrad
Associated Press, Jan. 3, 2007
Study says immigrants launch tech, engineering companies
by Krissah Williams
Washington Post, Jan. 5, 2007
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16 CommentsMuch ado about nothing. The report counts any company with ONE key immigrant founder as an company founded by immigrants.
Assuming for the moment the average number of founders is two, with 12% of the population immigrants by sheer random chance you'd expect 23% of companies to be founded by immigrants under this measurement.
If the average number of founders is greater than 2, it turns out that immigrants are founding fewer than their share of companies.
By the way, were the report's authors to have done the measurement the other way, shear chance would suggest 99% of companies are founded by native born Americans.
Of course that's too politically incorrect to print -- not to mention just as misleading as the 25% figure.
References: Darrell Huff, "How to Lie With Statistics", Norton 1954
January 16, 2007 2:04 PMWhat a lot of huey. Just what kind of "intellectual property" are we talking about? Comic books?
Follow the law and the rules and citizenship and investment capital will follow.
Fence jumping isn't going to cut it anymore.
To me, this seems to be the case of putting too much importance on one group of people, in this case, foreign-born immigrants.
I am an immigrant, too (I came to this country from Asia legally about 20 years ago). I have a business degree and have contributed to the US economy through legal employment. It took me almost 20 years to realize my enterpreneurial spirit in me. I had to research, study, read all kinds of business books, and work my rear-end off to get a business going. My business, American Business Ventures, Inc. is growing slowly but surely.
Anybody can build a business themselves. I don't believe that you have to single out foreign-born immigrants to succeed in business or have a propensity to go into business. That's the beauty of this blessed land. Anybody, not just foreign-born immigrants, can make it.
January 16, 2007 5:50 PMIt is difficult to find fault with anyone who comes to this country by LEGAL MEANS. The present outcry about immigration has to do with the problems of illegals and the cry of the far left that there is some moral right that says anyone can live anywhere they like and those here by legal means or birth should welcome them with open arms and more importantly, open pocket books.
In examining the research quoted, any thinking person would want to first read the premise/purpose of the scholarly work...that part which is almost always left out of the reported results of the research. It in short tells what is to be examined and if actual research will support the premise and what is the end use, ie., purpose of the effort. An obsurd example..."Have Men Stopped Beating Their Wives".
Always...Always remember: figures never lie, but liars alway figure.
January 17, 2007 8:49 AMJust came upon an article by SMALL BUSINESS TRENDS editor Anita Campbell, who distinguishes the legal/illegal issue rather well as it relates to business:
"Immigrants [...] who come to this country and start businesses and contribute to the economy, are a positive force. I never hear anyone complain specifically about self-employed entrepreneurial immigrants who arrive legally in the country and create businesses. It is the illegal immigrants who place stress on our hospital emergency rooms and on other social services, or who potentially pose security risks, that get all the negative attention [...] Let's keep reminding ourselves that there are immigrants...and then there are immigrants."
http://www.smallbiztrends.com
"Immigrants Refresh the Supply of Small Businesses," November 2006
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No doubt about it, folks, a healthy dose of skepticism is a GOOD thing, especially of numbers in business and industry and, really, anything in which politics manages to rear its fat head.
See: "Drowning By Numbers: Engineering in China, India, U.S." May 25, 2006
http://news.thomasnet.com/IMT/archives/2006/05/drowning
_numbers_engineering_statistics_united_states_china_india.html
(Copy and paste the 2-lined broken link above as 1 URL...we think it's worth it)
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And Bernie, to address "putting too much importance on one group of people, in this case, foreign-born immigrants":
We are simply highlighting ONE of MANY groups of people who are crucial to creating a booming nation. The U.S. cannot depend on just one group to drive its economy and to bring to life its brilliant, entrepreneurial spirit. Especially now, considering the current struggles small businesses are facing. That is why we are constantly amazed at the assiduity and dedication of blooming entrepreneurs such as yourself and MANY others of MANY walks of life.
Respect.
-David R. Butcher, IMT editor
January 17, 2007 10:04 AMAt the risk of being politically incrorrect and not in tune with the global picture, I offer the following concerning India for consideration:
The Berkeley study quoted above indicates 26% of
7,300 start-ups had Indian founders and as an immigrant group they were responsible for more tech start-ups than other ethnic groups. If one adds the huge numbers of medical doctors of Indian origin into the mix, my point becomes even more staggering.
If one takes those numbers as fact, one can only speculate as to what the quality of life in India might be if those highly educated and motivated person felt the love of their country that native-born US citizens have felt for theirs. India is the 7th largest country in the world in area, the 2nd largest in population, has a diverse population mix [diversity is GOOD, just ask any US minority]; has been a modern state for 60 years; its exports grew 24% in 2005-06 over the prior year and has the 3rd largest economy in purchasing power in the world.
BUT it has among the highest levels of poverty, malnutrition and environmental degradation in the world. 10% of the population earn 33% of all income; annual income averages $3547.00, which is 117th in the world and about 68% of population is literate.
Mr. Wadhwa shows concern as an immigrant to this country that, and I paraphrase, as immigrant entrepreneurs leave [the US], they dent the intellectual property base of a country ... and we are giving away the "keys to the kingdom". Has he and those other highly educated, motivated risk takers ever speculated as to what they may have done for their native land and if the quoted concerns might not also apply to his homeland?
The third world and other developing lands desperately need to retain the brightest and best, and the brightest and best need to be enough of a patriot to perhaps buy into the words of a US patriot when he said.." ask not what your country can do for you, ask what you can do for your country".
January 17, 2007 3:31 PMSo what's the problem with our educational system that we can't produce enough qualified people to fill the jobs. Fix the real problem. Visas and immigration are only a stop gap measures.
Perhaps the businesses that can't find qualified people should also look at there terms & conditions for employment. I have a degree in engineering and don't see anyone breaking down my door to hire me away from my current position, so where is the shortage. I think it is also unrealistic to expect to find a perfect match for every job. You can always come up with reasons to exclude candidates, but that won't help get the job done.
January 25, 2007 3:52 PMThe problem with the current immigration system for technical visas is that the H1B does not foster entrepreneurship, and its limited number and the difficult transition to a green card is likely to drive skilled migrants out of the States or to the "shadow" economy since the formal channels to corporate US are blocked.
First, the H1B ties the foreign employee with a sponsor up to 6 years. It is not a pass to start new ventures. That may happen if the green card comes along after the 6 years, however there is anecdotal evidence that is not happening, forcing people to relocate outside the US.
Second, the cap on the number of H1Bs is low, to the point that all spots are filled very quickly, leaving both potential employees and employers not even trying to get one.
The reports shed light on the importance of the foreign-born entrepreneurs initiating new high-tech ventures, which is good to foster the debate on this issue. However, what about the vast majority of immigrants, those working on low-skilled jobs, dedicated as R. Florida points out to serve the knowledge workers. Is there a role for them in the innovation process? Is this division of labor desirable from an equity perspective?
February 9, 2007 6:02 PM
