In the battle to increase entrepreneurial innovation, one key weapon just might be immigration reform. Some contend that highly skilled immigrants are key drivers of entrepreneurship and innovation in the U.S.—and have the potential to drive even more growth if barriers to their immigration were lifted.
Recently in Bloomberg Businessweek, Chris Farrell cited research by Vivek Wadhwa, Annalee Saxenian, Ben Rissing and Gary Gereffi showing that one-fourth of all engineering and technology companies started in the U.S. between 1995 and 2005 had at least one foreign-born founder. In Silicon Valley during the same period, an astounding 52 percent of all startups were immigrant-founded. And foreign nationals living in the U.S. were either inventors or co-inventors of 24 percent of all international patent applications filed in the U.S. in 2006.
But immigrants don’t have to be high-tech wizards to contribute as entrepreneurs. Even businesses like restaurants, dry cleaners and retail stores founded by immigrants make positive contributions. Research by David Card, an economist at the University of California, Berkeley, found that cities with high immigrant populations see an increase in their per capita tax base.
In a recent Inc. magazine article that highlighted 16 ideas for promoting entrepreneurship and creating jobs, one suggestion was immigration reform. Since U.S. universities still attract bright students from overseas, the article suggests, students who graduate from U.S. universities and want to start businesses here should get green cards to keep them in the country.
This would affect a substantial number of people. Farrell cites a recent study from the McKinsey Global Institute, Growth and Competitiveness in the United States, showing that in 2007, 62 percent of foreign nationals who got doctoral degrees in science or engineering in the U.S. remained in the U.S. for at least five years after graduating—an increase from 41 percent in 1992. And five years after graduation, more than 80 percent of graduates of Indian origin and 90 percent of Chinese graduates still lived in America.
Jonathan Ortmans, senior fellow at the Kauffman Foundation, argues that the current immigration system caps the number of skilled immigrants at an artificially low level. While the U.S. is restricting these immigrants, he warns, “other nations have been reforming in order to compete for highly qualified human capital.”
To attract innovative immigrants to the U.S., Ortmans suggests reforming the EB-5 visa, or “entrepreneur’s visa,” which currently requires prospective immigrants to bring $1 million into the country (or $500,000 if they are starting a company in a distressed area). Instead of putting barriers in the way, he says, the visa should incentivize business creation. For example, perhaps visas could be extended when the visa holder hires American residents.