High-tech Immigrant Entrepreneurship in the United States

by David M. Hart, Zoltan J. Acs, and Spencer L. Tracy, Jr.

Corporate Research Board, LLC Washington, DC 20002

2009 [85] pages. Under contract number SBAHQ-07-M-0455 

Survey: OMB Control Number 3245-0364

This report was developed under a contract with the Small Business Administration, Office of Advocacy, and contains information and 

analysis that was reviewed by officials of the Office of Advocacy. However, the final conclusions of the report do not necessarily reflect the 

views of the Office of Advocacy.

Purpose and Scope native-founded company (NFC) counterparts to have 

a strategic relationship with a foreign firm. The new products, services, and business models 

that the high-tech sector generates differentiate this Highlights nation’s output from that of the rest of the world and 

enable capital accumulation, wage gains, and pro- The authors’ results offer substantial evidence that 

ductivity growth. A high level of entrepreneurship immigrant entrepreneurs play a significant role in 

makes the high-tech sector vigorous. Immigration founding and sustaining high-impact, high-tech compolicy, as it affects highly educated and highly panies and that the profiles of immigrant and native 

experienced foreign-born individuals who might be founders differ along several dimensions.

drawn into high-tech entrepreneurship, is an important element in promoting high-impact, high-tech Companies:

company formation and growth. • About 16 percent of the companies in the nationThis paper quantifies the role of immigrants in ally representative sample report at least one of 

high-tech entrepreneurship using the High-impact, their founders is foreign born. This estimate is 

High-tech Company Survey database. The authors lower than the rate reported in most prior studalso examine U.S. immigration policies and process- ies of high-tech immigrant entrepreneurship. 

es (especially the H-1B visa) relevant to high-tech However, it is very close to the rate found by the 

immigrant entrepreneurship. Kauffman Firm Survey, although the populations 

sampled were quite different.

Overall Findings • Of the 205 IFCs in the sample, more than half 

were founded only by foreign-born entrepreneurs Analysis of the survey data indicate that immigrants (85 by a single individual, 30 by a team of two, play an important role in founding high-impact, and five by teams of three or more). high-tech companies in the United States. About 16 • IFCs are similar to NFCs in many ways—they percent of the companies in the nationally represen- operate in the same industries and are about the tative sample have at least one immigrant among same size. A major difference is company loca- their founders. tion. As expected, IFCs are more likely than High-impact, high-tech companies founded NFCs to be located in states with large immi- by immigrant entrepreneurs and those founded grant populations such as California and Texas. by native-born entrepreneurs are similar in many • IFCs are about twice as likely as NFCs to have ways. One important difference is their location. a strategic relationship with a company outside Immigrant-founded companies (IFCs), as expected, the United States, such as a major supplier, key tend to be located in states that have large immigrant partner or major customer (almost 42 percent, populations. IFCs are about twice as likely as their compared with 23 percent, respectively).

July 2009 No. 349
• IFCs and NFCs are similar in economic perfor- database of 2,034 company founders. An IFC is a 

mance (measured by company employment) and company with at least one foreign-born founder. A 

technological performance (measured by R&D high-impact company is a firm with sales that have 

and patent-holding), controlling for key factors at least doubled over the 2002-2006 period and 

such as company age and founder’s education. which has an employment growth quantifier of 2 or 

greater over the same period. A high-tech industry is 

Founders: defined in terms of its 3-digit SIC codes using R&D 

• Of the 2,034 founders in the sample, 261 or employment as a share of total employment as the 

about 12.8 percent are foreign born. key criterion. There are 49 such industries—44 in 

• Most foreign-born founders report they have manufacturing and 5 in the services sector.

lived in the United States for decades—the aver- Pearson’s chi-square test is used to assess the 

age duration is 25.9 years; 77 percent of the for- strength of association between cross-tabulated varieign-born high-impact, high-tech entrepreneurs ables. A variety of multivariate tests (ordinary leastare U.S. citizens. squares linear and logistic regressions) explore how 

• Foreign-born founders are highly educated— closely indicators of technological and economic 

they are more than twice as likely as native-born performance are associated with founder nativfounders to hold a doctorate degree. Two-thirds ity. The tests indicate that the relationship between 

of foreign-born founders received their highest founder nativity and technological performance is 

level of education in the United States. stronger than that between founder nativity and eco-

• India is the most cited founder birthplace; it nomic performance. However, this relationship is not 

accounts for about 16 percent of foreign-born statistically significant when company age, company 

founders. The United Kingdom accounts for 10 employment, and other factors are controlled.

percent, followed by Canada and Japan, each of This report was peer reviewed consistent with 

which constitutes 6 percent. the Office of Advocacy’s data quality guidelines. 

• The founding teams of IFCs are significantly More information on this process can be obtained 

more likely to include at least one woman; by contacting the director of economic research at 

about 30 percent, compared with about 20 per- advocacy@sba.gov or (202) 205-6533.

cent of NFCs. About 15 percent of all founders of high-impact, high-tech companies in the Ordering Information

sample are women. Women constitute about the The full text of this report is online at www.sba.gov/ same share of U.S.-born founders as of foreign- advo/research/rs349tot.pdf. Summaries and text of born founders. other studies performed under contract with the U.S. • Male foreign-born founders are more likely to Small Business Administration’s Office of Advocacy team with a female founder, regardless of nativ- are available on the Internet at www.sba.gov/advo/ ity, than male native-born founders. research. Copies are available for purchase from: • U.S. minorities represent about 15 percent of the National Technical Information Service native-born founders of IFCs, compared with 5285 Port Royal Road about 5 percent of the founders of NFCs. Springfield, VA 22161

(800) 553-6847 or (703) 605-6000 Scope and Methodology TDD: (703) 487-4639

The research examines the relationship between www.ntis.gov

high-impact, high-tech companies and immigrant Order number: PB2009-112616

entrepreneurship using data drawn from the OMB- Paper A06 ($48.00)

approved High-impact, High-tech Company Survey. Microfiche A04 ($33.00)

The survey was conducted by the George Mason CD-ROM A00 (30.00)

University Center for Social Science Research Download A00 ($15.00)

between October 2008 and January 2009 based on 

a nationally representative sample of rapidly grow- For email delivery of Advocacy’s newsletter, 

ing high-impact, high-tech companies. Data from press, regulatory news, and research, visit http://

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