Immigrant Entrepreneurship

Introduction

Immigrant entrepreneurs in the United States of America embody the deeply cherished notion of socioeconomic mobility. While unskilled, uneducated immigrants entering the country illegally receive a great deal of attention in the national forum, there is little attention paid to the educated workers who enter the country legally. They also represent a sizable part of the economy, thus attracting the attention of researchers and policy makers. Entrepreneurship is theoretically linked to positive economic outcomes through the concepts of opportunity,innovation, risk, and standard operating procedures. A better understanding of the demographics and statistics around immigrant entrepreneurs can aid policy makers and economists alike in their attempts to create and understand the complex network of factors that surround and aid the success of immigrant entrepreneurs.

Current Situation/trends

Immigrant entrepreneurs face greater barriers in starting a business in their host country than a native. These barriers include lacking access to capital and difficulty penetrating local markets. Thus, their success depends on the specific opportunity structure of the time and place where they are. Local government policy, the size of the homogeneous ethnic population, local and national regulations and other factors combine to make entrepreneurship more difficult for immigrants than natives. The research is inconclusive as to the motivations and risks faced by immigrant entrepreneurs with some researchers suggesting that a lack of upward mobility in larger corporations- possibly due to discrimination- may mean starting a company comes at a lower opportunity costs than their domestic counterparts and thus there is less perceived risk in branching out. Other researchers contend that upward social mobility has increased in recent decades, a proposition consistent with the literature on post-industrialization economies, and thus starting a business is perceived as presenting a unique chance to engage in this upward mobility.

Demographics

In countries where data was gathered by the Office of Economic Development, immigrants are slightly more likely than natives (12.7% vs 12%) to be entrepreneurs. OECD also found that immigrant entrepreneurs are slightly more educated and younger than their native counterparts. This may be a result of many immigrant entrepreneurs enter the US country on a student/trainee or temporary work visa.

A study on high-tech foreign entrepreneurs in the U.S. by David Hart and Zoltan Acs found that foreign born are disproportionately represented in science and engineering (S&E) education and occupations in the U.S. 25% of all S&E graduate students were foreign born in 2005. The highest concentrations at the time of the study were in engineering (45%) and computer sciences (43%). In S&E occupations, 26% of college-educated workers were foreign born, compared with their 12% share of the overall population. Immigrants do not generally come to the U.S. thinking they will start a business. In a study from Education, Entrepreneurship and Immigration, over half of the (52.3%) immigrants came to the U.S. primarily to study, (39.8%) for a job opportunity, and (1.6%) came with the sole purpose of starting a company. The Office of Economic Development found that within OECD countries, a foreign-born self-employed who owns a small or medium firm creates between 1.4 to 2.1 additional jobs, slightly less than the equivalent figure of 1.8-2.8 additional jobs created by their native-born counterparts. They also found that businesses started by foreign-born owners were less likely to survive than those owned by native born persons and that understanding the local language and law was critical to business success.

Data shows that (96%) of immigrant entrepreneurs involved in engineering and technology have completed a bachelor’s degree, and (74%) hold master’s or PhD degrees. Typically Asian, Middle Eastern and African immigrants come from the middle class and are working professionals, while most Latino and Caribbean immigrants have agricultural or working-class backgrounds.

Immigration trends

While it is difficult to ascertain the exact number of immigrant entrepreneurs entering the United States each year, the total number of immigrants is known. According the U.S. Census, 6.5 million people have immigrated to the United States within the last decade. This number is expected to substantially increase over the coming decades, the Census Bureau projects an average of 1 million immigrants per year during the years 2010-2030. Although there is no formal literature on the subject, it is a reasonable assumption that this increase in total immigration will correlate with an increase in immigrant entrepreneurs.

Value created

Immigrant entrepreneurship tends to be clustered in markets with low barriers to entry and low human capital requirement, those of low-skilled, small scale, labor-intensive production with little growth potential. They are also notably present in high-skilled, high growth potential markets such as technology, which ties to the fact that many entered the host country on student visas. Markets of low skill and high growth are very appealing to immigrant entrepreneurs, again because they have low barriers to entry - an example being personal services. “A study in 2008 found that 16% of high-impact high tech companies were founded by teams that included at least one immigrant entrepreneur though the vast majority had lived in the U.S. for more than a decade, with the average time in the U.S. being over 25 years, and over 77% being U.S. citizens. Among these high-tech company founders, the greatest number of immigrant entrepreneurs came from India (16%) followed by the U.K. (10%), Canada (6%), Japan (6%), Germany (5%), China (3%) and Cuba (3%).”

Student researchers at Duke University expanded upon an earlier study by Professor AnnaLee Saxenian to gain a deeper understanding of immigrant entrepreneurs in technology and engineering. The study focused on a large sample of technology and engineering companies started in the U.S. from 1995 to 2005. They found that nationwide, these immigrant-founded companies employed 450,000 workers in 2005 and produced $52 billion in sales. It was also noted that nearly 80% of immigrant-founded companies in the US were within just two industry fields: software and innovation/manufacturing-related services. Immigrant founders were most highly represented in the semiconductor, computer, communications, and software fields. Defense/aerospace and environmental industries companies were least likely to be started by immigrants. Saxenian’s original research had focused on California and the Silicon Valley, and the updated data-set shows that over half (52.4%) of Silicon Valley start-ups had one or more immigrants as a key founder, and that the numbers of start-ups founded by Indian and Chinese immigrants had increased significantly. The researchers conclude that “What is clear is 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.” Data shows that (96%) of immigrant entrepreneurs involved in engineering and technology have completed a bachelor’s degree, and (74%) hold master’s or PhD degrees. This means nearly every single immigrant that is starting a business has an education of at least a bachelor’s degree.

Reverse brain-drain

There is a very limited number (approximately 120,120) employment-category visas available every year, and a multi-year backlog of over a million persons waiting to immigrate to the U.S. The fact that so few immigrants are allowed to enter while all are allowed to leave raises concerns that the U.S. will start to suffer reverse brain-drain as skilled immigrants are either not allowed to enter the country or are forced to return to their home countries. An informal study, conducted by Duke University student researchers in Engineering through Facebook contacts, found that most foreign students did not plan to stay in the U.S. for more than the next 5 years and that the vast majority of foreign students worry about their ability to obtain work visas. Over half of the students were concerned about obtaining permanent U.S. residency, it was found that roughly half of these students felt that the best job opportunities lie in their home country. In contrast, the most skilled immigrants of the 1980s and 1990s, believed that the best opportunities were in the United States. Less than a quarter of the students surveyed stated that they believe the best days of the U.S. economy lie ahead. Conversely, over 75% of Chinese and Indian students stated that the best days for their native economies still lie ahead.

Diaspora in/outflows

Immigration in the United States ebbed after the mass migrations that ended about 1930 and then picked up again with the Immigration act of 1965. The 2010 census shows that 12.9% of the U.S. population is foreign born. Within the foreign-born population, over half (53%) come from Latin America and 29% from Mexico alone. 28% were born in Asia, 12% in Europe, and 4% in Africa. About half of the foreign-born had been in the U.S. for 20 years or less and ⅓ for 10 years or less. 44 percent are naturalized citizens. The same census found that the foreign born were more to be in the labor force than the native born. Over a quarter of the foreign born work business, management, science and art and an additional one-quarter work in service occupations.

Legal considerations

Throughout Europe and the United States there has been a favorable policy shift targeting educated migrants.

Visa Types

Immigrants can enter the United States using a number of different visas. These are divided up into two general categories: non-immigrant and immigrant; they differ in number issued and length of stay permitted. Non-immigrant visas grant the entrepreneur the right to live and work in the United States for a specified time period, which may be anywhere from six months to seven years, with various extensions possible. Immigrant visas awards permanent resident status to holders and allows for an indefinite stay in the United States. The various visas are listed below:

Non-Immigrant Visas

Type	Length of Stay	Description
Business Visitor	Up to 6 months, extensions available	Those eligible for a B-1 visa come to the United States as a business visitor in order to secure funding or office space, negotiate a contract, or attend certain business meetings in connection with opening a new business in this country.
F-1/OPT Optional Practical Training	12 month initial stay, with 12 or 17 month extensions possible	F-1 students in the United States seeking to start a business that is directly related to their major area of study are eligible for the OPT visa. Students in English language training programs, however, are ineligible for OPT.
H-1B Specialty Occupation	3 years, additional 3 year extension possible	The H-1B visa is issued to those planning to work for a business they started, in the United States, in an occupation that normally requires a bachelor’s degree or higher in a related field of study (e.g., engineers, scientists or mathematicians), and they have at least a bachelor’s degree or equivalent in a field related to the position.
O-1A Extraordinary Ability and Achievement	3 years, 1 year incremental extensions possible	The O-1A visa is for those with extraordinary ability in the sciences, arts, education, business or athletics, which can be demonstrated by sustained acclaim and recognition, and will be coming to the United States to start a business in their field.
E-2 Treaty Investor	2 years, 2 year incremental extensions possible	The E-2 visa is granted to those who invest a substantial amount of money in a new or existing U.S. business. The visa is only issued to those from a country that has a treaty of commerce and navigation with the United States or a country designated by Congress as eligible for participation in the E-2 nonimmigrant visa program. For a list of treaty countries, visit the Department of State website.
L-1 Intracompany Transferee	up to 7 years, varies depending on position and industry	The L-1 visa is for “intracompany transferees” namely executives, managers, or workers with specialized knowledge who has worked abroad for a qualifying organization (including an affiliate, parent, subsidiary or branch of the foreign employer) for at least one year within the 3 years preceding the filing of your L-1 petition (or in some cases your admission to the United States). The organization must seek to transfer the applicant to the United States to work in one of the capacities listed above.

Immigrant Visas

Type/Classification	Description
EB-1 Extraordinary Ability	The EB-1 visa is for those with extraordinary ability in the sciences, arts, education, business or athletics, which can be demonstrated by sustained acclaim and recognition, and will be coming to the United States to start a business in their field.
EB-2 Advanced Degree Professional	Individuals eligible for this visa include: (1) professionals holding a U.S. master’s degree or higher or foreign equivalent degree; or (2) those holding a U.S. bachelor’s degree or foreign equivalent degree and at least 5 years of progressively responsible experience in your field after receiving the bachelor’s degree.
EB-2 Exceptional Ability	Exceptional ability refers to those with a degree of expertise significantly above that ordinarily encountered in the science, arts, or business.

Notable Companies Founded by Immigrant Entrepreneurs

Company	Founder	Country of Origin
AT&T	Alexander Graham Bell	Scotland
Big Lots!	Sol Shenk	Russia
Colgate	William Colgate	England
Comcast	Daniel Aaron	Germany
Dupont	Eleuthère Irénée (E.I.) du Pont	France
Ebay	Pierre Omidyar	France
Goldman Sachs	Marcus Goldman	Germany
Google	Sergey Brin	Russia
Kohl’s	Maxwell Kohl	Poland
Kraft Foods	James L. Kraft	Canada
Nordstrom	John W. Nordstrom	Sweden
Pfizer	Charles Pfizer, Charles Erhart	Germany
Procter & Gamble	William Procter, James Gamble	England, Ireland
Radio Shack	Theodore and Milton Deutschmann	England
Sara Lee	Nathan Cummings	Canada
Yahoo!	Jerry Yang	Taiwan

Conclusion

In the 21st century, immigrant entrepreneurs have been a major driving force behind some of the greatest technology and engineering companies in the United States. Policymakers would do well to note the important role that foreign-born immigrants continue to play in the modern American economy. The average immigrant entrepreneur in technology and engineering fields is educated and the population of foreign students in the U.S. on student visas should be of great interest to policymakers. Many of these students doubt their abilities to extend their visas and there is a tremendous backlog of persons waiting to receive visas to the U.S. Policymakers should take a good look at the limit on the number of visas available and the process that is currently in place, and look to create policy that encourages even more educated foreign-born persons to come to the United States.

See also

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• List of entrepreneurs
• Business opportunity
• Corporate social entrepreneurship
• Entrepreneurship ecosystem
• University spin-off
• Immigration to the United States

References

See Also:

• Entrepreur Visa Guide; http://www.uscis.gov/eir/visa-guide/entrepreneur-visa-guide
• http://www.ilctr.org
• http://www.huffingtonpost.com/2013/04/22/american-companies-founded-by-immigrants_n_3116172.html

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