Immigrants start 25 percent of high-tech firms, study shows, but number is on decline

Published: Friday, Oct. 5 2012 10:36 a.m. MDT

A new study by the Kauffman Foundation shows that in 2011 immigrants founded one-quarter of U.S. technology startup companies. The study, "America's New Immigrant Entrepreneurs: Then and Now," shows that 24.3 percent of all engineering and technology startup companies have at least one immigrant founder serving in a key role.

The trend is particularly strong in Silicon Valley, where of 335 engineering and technology startups analyzed, 43.9 percent were founded by at least one immigrant.

When just examining top-performing companies, the findings are even more pronounced. A study by the National Foundation for American Policy found that among the top 50 startup companies in the United States, immigrants founded roughly half.

Companies with immigrant founders include the textbook rental company Chegg and the craft website Etsy. The most common countries of origin for these entrepreneurs were India, Israel, Canada, Iran and New Zealand, according to the National Foundation for American Policy.

But the Kauffman study also showed that while many companies have immigrant founders, their numbers appear to be on the decline. The change was especially dramatic in Silicon Valley, where “the percent of companies with at least one immigrant founder fell from 52.4 percent (in 2005) to 43.9 percent.”

Since 9/11, tougher immigration policies have made it more difficult for highly skilled workers to come to the United States. These findings suggest that highly skilled immigrants have begun to leave the United States for other countries, taking their businesses with them, according to Vivek Wadhwa, principal researcher on the study. That is, highly skilled and U.S.-educated immigrants are going to India and China, where more economic opportunities exist for them.

Wadhwa argues that it is time for immigration policy to change. "The U.S. risks losing a key growth engine just when the economy needs job creators more than ever," said Wadhwa. "The U.S. can reverse these trends with changes in policies and opportunities, if it acts swiftly. It is imperative that we create a startup visa for these entrepreneurs and expand the number of green cards for skilled foreigners to work in these startups. Many immigrants would gladly remain in the United States to start and grow companies that will lead to jobs."

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