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Immigrants and American Economic Dynamism
In the Harvard Business Review, Sari Pekkala Kerr and William Kerr write, “Global talent flows will continue to be a fundamental force shaping the U.S. economic and business landscape. This is especially true for entrepreneurship given the economic dynamism that startups unleash and the disproportionate role of immigrants in this process.”
And among their findings (some of which are reflected in the above chart):
1. Immigrants constitute 15% of the general U.S. workforce, but they account for around a quarter of U.S. entrepreneurs (which we define as the top three initial earners in a new business). This is comparable to what we see in innovation and patent filings, where immigrants also account for about a quarter of U.S. inventors.
2. Many discussions around immigration and entrepreneurship focus on startups backed by venture capital firms and entrepreneurs seeking high-growth opportunities that could result in the next Starbucks, Facebook, or Staples. We have merged in data on the firms backed by VC financing. On the whole, immigrant entrepreneurship is somewhat stronger for VC-backed firms, with 31% of VC-backed founders being immigrants, compared to 25% of all entrepreneurs in 2005.
3. Immigrant founders launch firms that are smaller than native-founded firms. The average initial employment for firms founded by immigrants exclusively is 4.4 workers, compared to 7.0 workers for firms launched exclusively by natives. When both types of founders are present (i.e., “mixed founder team”), the average is 16.9 workers.
4. We quantify subsequent firm performance by analyzing employment growth and closure rates. The firms founded by immigrants close at a faster rate than firms founded by natives, but those that survive do grow at a faster rate in terms of employment, payroll, and establishments for the next six years. Previous research has found that this phenomenon — called “up or out” — is how young firms create more jobs. Compared to older firms, which show modest growth regardless of their size, young firms and new entrants have more dynamic patterns that foster greater job creation. Immigrant-founded firms display more of this behavior.
While immigrants certainly seem to play an outsized role in US entrepreneurship, the authors conclude more research is needed to better understand “the causes and effects of increasing immigrant entrepreneurship.”
And this seems as good a time as any to point out, via the National Foundation for American Policy, that “immigrants have started more than half (44 of 87) of America’s startup companies valued at $1 billion dollars or more.”
Published in Economics, Immigration
The data may become interesting when immigrant entrepreneurs are separated by national origin and date because this has always been the case. I expect the bulk of entrepreneurs are Asians or from specific countries outside of Asia and that the rate of increase in slowing down. Those who have been here for several generations take advantage of parents’ success and go to school to acquire credentials and eschew the hard work and risk of entrepreneurship. We need them but we need to know who they are and what is inhibiting entrepreneurship.
Hey, let’s get rid of all the citizens and replace them immigrants, especially the illegal ones. They are just so much better people than the normal run of the mill citizens.
They are? What makes you say that?
Interesting information to read.
You are partly right but I think it is about culture. Race is just a proxy to culture but there is just not great data on segmenting cultures to study them therefore race shows a collation .
Just get a little tired of the open borders crowd tell everybody how wonderful all immigrants. It is a little much.
Everyone, watch this (approx. 1.5 hours), then get back to me.
http://cis.org/Videos/American-Workers-Panel
When Lyndon Johnson destroyed America with the Great Society, in his mind’s eye he was just recreating the Civilian Conservation Corps of his youth. Likewise, when eggheads like Mr. P rhapsodize about immigrants they are thinking Sergy Brin or maybe a Filipina nurse…not the Guatemalan kid that creates havoc in his second grade class because he’s terrified of flush toilets or the MS-13 thug covered eyebrows to ankles with gang tattoos shooting the next Kate Steinle. Don’t you fret Mr. P, Hillary is going to throw whatever remains of enforcement under the bus and you’ll get to reap what you want to sow.
If you can’t commit to the entire 1.5 hours, it is broken down in sections. Please at least watch the 11 minutes by Professor Amy Wax and the 11 minute segment by Charles Murray- extremely relevant.
Nothing wrong with opening a sandwich shop — market forces after all, but not one of them will become the next Apple, etc.
Jimmy P. (as Mark levin says), if you neither knew nor cared about economics, what would your position be on immigration? Not in the abstract, but right now, minus economics.
Perhaps you have addressed this elsewhere.