The Disappearing Immigrant Entrepreneur

One of the most potent sources of growth in the U.S. hightech economy has been foreign brainpower. Immigrants were responsible for more than half of the start-up launches in Silicon Valley between 1995 and 2005—and more than one in four new engineering and technology ventures nationally.

But Duke’s Vivek Wadhwa says that trend has stagnated, putting the country’s leadership in high-tech innovation at risk.

Wadhwa, director of research at the Center for Entrepreneurship and Research Commercialization of the Pratt School of Engineering, documented the unprecedented decline in immigrantfounded start-ups in a study for the Kauffman Foundation, a Kansas City-based nonprofit that supports entrepreneurship and education. The report shows the percentage of new U.S. companies with a foreign-born founder has slipped from 25.3 percent to 24.3 percent since 2005.

In Silicon Valley, the trend is more pronounced, with just 43.9 percent of start-ups having a foreign leader, compared to 52.4 percent in 2005. “The U.S. risks losing a key growth engine just when the economy needs job creators more than ever,” says Wadhwa, who published his findings in a book titled The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent.

One exception to the trend comes from India. Although founders in the study hailed from more than sixty countries, 33.2 percent of them were Indian, an increase of 7 percent in 2005. After India, immigrant founders represented China (8.1 percent), the United Kingdom (6.3 percent), Canada (4.2 percent), Germany (3.9 percent), Israel (3.5 percent), Russia (2.4 percent), Korea (2.2 percent), Australia (2.0 percent), and the Netherlands (2.0 percent).

Wadhwa says the U.S. can counteract the trend with reforms in immigration policies targeted to encourage foreign-born entrepreneurs to stay in the U.S. “It is imperative that we create a start-up visa for these entrepreneurs and expand the number of green cards for skilled foreigners to work in these start-ups,” he says. “Many immigrants would gladly remain in the U.S. to start and grow companies that will lead to jobs.”