Our Best Imports: Keeping Immigrant Innovators Here

From 1995 to 2005, 52 percent of Silicon Valley’s technology and engineering companies were founded by immigrants. The majority came to the United States as students. They ended up staying after graduation and on average founded companies 13 years after their arrival. They also filed 25 percent of America’s global patents, significantly boosting U.S. competitiveness. Their contributions to the new American economy are vast, and their importance is clear.

But because of the burgeoning economies of countries like India and China and flawed U.S. immigration policies, the proportion of immigrant-founded companies is likely to be significantly lower over the next decade. This doesn’t mean there will be greater opportunities for native-born Americans: It means that there will be fewer startups; that entrepreneurship will be booming instead in countries like India and China; that Silicon Valley will face unprecedented competition from American-educated and -trained talent that, rather than staying in the land of opportunity as so many have done for so long, returned home.

The research team I work with at Duke, Harvard, New York University, and the University of California-Berkeley has been studying the impact of skilled immigration on American competitiveness. We have looked at trends in outsourcing; research and development, innovation, and entrepreneurship in India, China, and the United States; and the reverse migration of skilled talent from the United States to India and China. Over the course of five years, we have conducted surveys of thousands of technology and engineering companies, interviewed hundreds of company founders, surveyed thousands of foreign students and returnees, and made several trips to India and China to understand the on-the-ground realities in those countries. Most recently, we completed a survey of 250 entrepreneurs who returned to India and China to start their ventures there. And our research and analysis lead to one conclusion: America must revise its immigration policies if we are to remain the world’s leading incubator of entrepreneurship.

America’s New Immigrant Entrepreneurs

Our current immigration policies have left companies and entrepreneurs hamstrung. Limits on visas for skilled and exceptional workers have prevented businesses on our shores from finding the talent they need to keep up with rivals abroad. Foreign nationals who graduate with advanced degrees or who seek a new place to start a business increasingly don’t see America as the launching pad for their dreams—and we’re not offering them sufficient incentives to convince them otherwise. If we are to revive our innovative capacity, we need to find new ways to bring immigrant thinkers and entrepreneurs to America.

How essential have immigrants been to our economic success? In 2006, we surveyed 2,053 firms founded nationwide over the previous ten years. We found that 25.3 percent had a chief executive or lead technologist who was foreign born. We estimated that in 2005 immigrant-founded tech companies generated $52 billion in revenue and employed 450,000 workers. In some industries the percentages of immigrant founders were higher. The percentages of all startups that were founded by immigrants in various sectors include: semiconductors, 35.2 percent; computers/communications, 31.7 percent; software, 27.9 percent; and innovation, 25.9 percent.

To understand the educational background of these immigrants and what brought them to America, we interviewed 144 company founders in 2007. We learned that immigrant technology-company founders tended to be highly educated: Fully 96 percent held bachelor’s degrees, and 74 percent held graduate or postgraduate degrees. Three-quarters of these advanced degrees were in science, technology, engineering, and mathematics (STEM) fields. The vast majority of these company founders didn’t come to the United States as entrepreneurs; 52 percent came to study, 40 percent came to work, and 5.5 percent came for family reasons. Only 1.6 percent came to start companies in America. Clearly, many saw opportunities once here that they had not envisioned.

To understand the intellectual contribution of immigrants to the United States, we studied U.S.-originated international patent filings by U.S. resident inventors. In 2006, foreign nationals residing here were named as inventors or co-inventors in 25.6 percent of patent applications filed from the United States. Immigrants were critical to the success of some of America’s largest companies. For example, they contributed to 72 percent of the total patent filings at Qualcomm, 65 percent of the total at Merck, 64 percent of the total at General Electric, and 60 percent at Cisco Systems. Overall, more than 40 percent of the international patent applications filed by the U.S. government also had foreign-national authors.

This all sounds wonderful, but there’s a dark side to the story. There is a massive backlog of skilled immigrants and their family members—more than a million people in all—awaiting legal permanent resident status in the United States. The reason for the increasing backlog is that only 120,000 visas are available per year in the key visa categories for skilled workers. Additionally, no more than 7 percent of the visas can be allocated to immigrants from any one country. So immigrants from countries with large populations like India and China have the same number of visas available—8,400—as those from small-population countries like Iceland and Costa Rica. In addition, a 2003 survey found that the process of applying for permanent residence is so arduous that 17.4 percent of new legal immigrants became depressed as a result of the visa process. Approximately 21.7 percent of new legal immigrants and 34.5 percent of “employment principals” either planned to leave the United States or were uncertain about remaining. Contrary to the age-old story about wanting to make it in America, people were wanting to go home.

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