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Recent Research: High-skilled immigrant entrepreneurs create a positive effect on U.S. entrepreneurial ecosystem

December 01, 2022
By: Emily Chesser

Two recent working papers — The Impact of High-Skilled Immigration on Regional Entrepreneurship from Columbia University and Getting Schooled: The Role of Universities in Attracting Immigrant Entrepreneurs from the Philadelphia Federal Reserve Bank — explore the impact of high-skilled immigrants on entrepreneurship and how universities attract immigrant entrepreneurs. Both papers find that high-skilled immigrants have a positive net effect on regional entrepreneurship and are critical to the entrepreneurial ecosystem.

In the first working paper, The Impact of High-Skilled Immigration on Regional Entrepreneurship, the authors Jorge Guzman, Inara Tareque, and Dan Wang studied the impact of high-skilled immigration at the metropolitan city level using the Core-based Statistical Areas (CBSA) and neighborhood (zip code) level data. The authors used newly released H-1B data from the U.S. Department of Labor and the U.S. Citizenship and Immigration Services. The H-1B visa program allows 85,000 new high-skilled foreign nationals to work in specialized roles in the U.S. for up to six years. However, under the H-1B visa program, immigrants are only allowed to work for the employer who sponsored the visa, limiting the ability of H-1B visa holders to become entrepreneurs. The authors used three complementary identification approaches to formulate their results: a shift-share instrument, panel data, and neighborhood effects at the zip code level.

The authors found that skilled immigration has a positive impact on regional entrepreneurship. According to the paper, a 20% increase in skilled immigration correlates to a rise of 1% in the three-year quality-adjusted entrepreneurship at the city level and a 1.2% increase at the neighborhood level. Quality-adjusted entrepreneurship considers performance outcomes like employment growth, innovation output, and successful liquidity events. However, the authors find that these results are not instantaneous. According to the paper, the effect in the calendar quarter immigration occurs is zero, but eight quarters later, there is an increase in the quality-adjusted entrepreneurship that was noted.  

Additionally, these results are only consistent with the entrance of high-skilled immigrants. Unskilled immigrants using H-2B visas provide no effect on the quality-adjusted entrepreneurship level. The authors also found a positive correlation between the level of local immigrants within a zip code and the arrival of new high-skilled immigrants, supporting the idea of “ethnic enclaves.” Ethnic enclaves refer to regions with high levels of immigrant presence where knowledge sharing often occurs. According to the paper, immigrant-founded ventures within these ethnic enclaves are often more successful and report higher returns.

In the working paper from the Philadelphia Fed, Getting Schooled: The Role of Universities in Attracting Immigrant Entrepreneurs, the authors Natee Amornsiripanitch, Paul A. Gompers, George Hu, and Kaushik Vasudevan focus on venture capital-backed immigrant entrepreneurs using a combination of data sets. The authors used the different data sets to categorize immigrant entrepreneurs into three categories: those who first came to the U.S. for undergraduate study, those who first came for postgraduate education, and those who came after receiving their education elsewhere.

The authors found that over 75% of immigrant entrepreneurs in the sample received some form of education in the United States. About 40% of immigrant founders in this sample founded firms in the same state where they were educated. The authors also found that immigrant entrepreneurs are more likely than native-born founders to have STEM degrees, found IT companies, and patent inventions through startups, suggesting that they make critical contributions to the innovation and technology ecosystems in the U.S. The higher patenting rates of immigrant-founded firms are driven mainly by founders who entered the U.S. to attend graduate school. This finding demonstrates the importance of the U.S. higher education system in bringing high-skilled immigrant entrepreneurs into the country.

immigration entrepreneurs, immigration, entrepreneurship, higher ed