Industry Market Trends

Immigrants Become Founding Fathers

Jan 16, 2007

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."


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