Kauffman: Immigrant Entrepreneurship Slows Overall, Zooms Among Indians

As we’ve often noted on the MurthyBlog, immigrant entrepreneurs have fueled much of America’s growth in the high-tech sector over the past two decades. Since 1995, immigrants have founded or co-founded more than half of all Silicon Valley firms, in the process launching many of the giants of the internet era – Google, Intel, Sun, and eBay, among others. Their contributions to the U.S. economy have been enormous.

A new study from the Kauffman Foundation – a leading think tank that studies and promotes entrepreneurship – strongly suggests that we shouldn’t take that growth for granted. [See Then and Now: America’s New Immigrant Entrepreneurs, Part VII, by Vivek Wadhwa, AnnaLee Saxenian, and F. Daniel Siciliano, Ewing Marion Kauffman Foundation, Oct.2012.] According to Vivek Wadhwa and his colleagues, who analyzed trends in immigrant entrepreneurship from 2006 to 2012, “for the first time in decades, the growth rate of immigrant-founded companies has stagnated, if not declined.” It’s a shallow decline, admittedly – the share of immigrant-founded companies has dropped since 2005, when it was 25.3 percent, to the current rate of 24.3 percent. The Kauffman team notes that the drop is within the margin of error, but cautions that the message in the numbers is unmistakable: “immigrant-founded companies’ dynamic period of expansion has come to an end.”

According to the Kauffman study, the decline is still more marked if you look at Silicon Valley, the hothouse of immigrant entrepreneurship in recent decades:

“The findings indicate that 43.9 percent of Silicon Valley startups founded in the last seven years had at least one key founder who was an immigrant. This represents a notable drop in immigrant-founded companies since 2005, when 52.4 percent of Silicon Valley startups were immigrant-founded.”

Despite a modest decline in immigrant entrepreneurship overall, certain groups – notably, Indian and Chinese immigrants – actually “are starting companies at higher rates than they did previously,” the Kauffman study finds. In fact, Indian entrepreneurs rank first among immigrants that have founded companies since 2006, in high-tech industries like bioscience, computers and communications, innovation and manufacturing, semiconductors, software, defense / aerospace, and environmental products and services.

Several other findings underscore the pivotal role played by Indian entrepreneurs in the engineering and technology sectors, during the 2006-2012 period studied by the Kauffman team:

  • “Indians continue to be at the forefront of immigrant-led entrepreneurship.”
  • “Of the total of immigrant-founded [engineering and technology] companies, 33.2% had Indian founders, up about 7% from 2005. Indians have founded more such companies than immigrants born in the next top seven immigrant-founder-sending countries combined.”
  • “The top ten sending countries of immigrant entrepreneurs in descending order were India (33.2%), China (8.1%), the United Kingdom (6.3%), Canada (4.2%), Germany (3.9%), Israel (3.5%), Russia (2.4%), Korea (2.2%), Australia (2.0%) and the Netherlands (2.0%).”

The Kauffman study concludes that “high-skilled immigrants will remain a critical asset for maintaining U.S. competitiveness in the global economy,” but refrains from recommending new policies to bring more of these ambitious and creative immigrants to U.S. shores. Because the Kauffman study is largely diagnostic – descriptive and analytical rather than prescriptive – it stays above the political fray. One hopes that makes it all the more likely to be read – and acted upon – in Washington’s corridors of power.

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