Lessons for U.S. Metro Areas: Characteristics and Clustering of High-Tech Immigrant Entrepreneurs (comprehensive white paper version)

Another version of this paper is available at: http://ssrn.com/abstract=2416903Immigrant-owned enterprises are an increasingly important part of the U.S. economy. According to the 2007–2011 American Community Survey (ACS), immigrants now comprise 20 percent of the high-tech work force and 17.3 percent of high-tech entrepreneurs. This is an increase from 13.7 percent and 13.5 percent, respectively, in 2000. Between 2000 and 2011 (the ACS five-year data), the immigrant labor force in high-tech industries grew much faster than the U.S.-born labor force did—37.2 percent versus 10.7 percent. The self-employed in high-tech industries for the foreign-born grew even faster, with a rate of 64 percent, compared to 22.6 percent for the U.S.-born. For both time periods, half of the self-employed immigrants in high-tech industries are incorporated, a higher rate than for the native-born labor force. Past empirical studies have demonstrated the importance of high-skill immigrants in high-tech sectors, entrepreneurship, and job creation (Saxenian, 1999, 2006; Wadhwa et al., 2007, 2012). However, we have little understanding about their presence outside of Silicon Valley, especially geographically and by sector. This paper further addresses geographic factors that correlate with the concentration of high-skill immigrant entrepreneurs across metropolitan areas, providing policy implications for local and state strategies to promote an immigrant-friendly environment. Key findings include: • Among the top ten countries from which immigrants in high-tech industries have arrived to the United States, there is a significant variation in rate of self-employment and its growth over time. In period 2007–2011, the national rate of self-employment in high-tech industries is 6.2 percent. The rate is around 2 percent to 3 percent for immigrants from Vietnam, Mexico, and Philippines, and 9 percent to10 percent for immigrants from England, Iran, and Canada. • Since the beginning of the new century, the total number of the self-employed labor force in high-tech industries experienced significant growth in immigrants from Columbia, China, India, Korea, and Vietnam, but stagnant growth for countries like Iran, England, Mexico, Germany, and Cuba. • Compared to their U.S.-born counterparts, who are more evenly distributed across all the high-tech sectors, immigrant owned high-tech businesses are more concentrated in a limited number of industries, such as semiconductor, other electronic component, magnetic, and optical media, communications, audio/video equipment, and computer science-related sectors. • Spatially, immigrant high-tech entrepreneurs are concentrated in a smaller number of metropolitan areas, with 80 percent of them concentrated in the largest twenty-five metropolitan areas, in contrast to 57 percent of their U.S.-born counterparts. • Across different groups, immigrant high-tech entrepreneurs demonstrate the highest concentration, surpassing all high-tech workers and all workers. At the same time, the evidence suggests that concentration fell from 2000–2011, which is consistent with growing literature that documents immigrants’ dispersing settlement patterns. • Both immigrant and U.S.-born high-tech businesses are more likely to locate within regional labor markets that have an overall higher percentage of high-tech industries and higher innovation capacity. At the same time, metropolitan areas with higher percentages of construction and social services tend to have a higher number of native-born-owned businesses in high-tech industries. • Unlike the U.S.-born, however, higher ethnic diversity and a larger share of the foreign-born population are crucial factors in attracting or fostering immigrant high-tech entrepreneurship on the metropolitan level. These results imply that an open and culturally diverse environment is positively associated with creative and innovative activities for both immigrants and the U.S.-born.