WRAL Tech Wire

Posted January 8, 2007

America's New Immigrant Entrepreneurs: A Growing Trend

Editor’s note: Last week, a student research team at Duke University’s Master of Engineering Management Program and the University of California at Berkley School of Information published a ground-breaking study about the importance of skilled immigrants to development of the U.S. economy, especially in development of engineering and technology companies. Helping direct the effort was Vivek Wadhwa, an entrepreneur and founder of two high-tech firms in the Research triangle, including Relativity. A portion of the report’s executive summary highlighting key points follows:

DURHAM, N.C. - Two of the most important questions now being debated in the U.S. are the effects of globalization and immigration on the nation’s economy. Globalization is accelerating and it is still not clear whether trends like outsourcing will erdode U.S. competitiveness or provide long-term benefits. The focus of the immigration debate is on the plight of millions of unskilled immigrants who have entered the U.S. illegally. Overlooked in the debate are the hundreds of thousands of skilled immigrants who annual enter the economy legally. …

The results [of this new study] show that the trend [AnnaLee] Saxenian documented for Silicon Valley [in 1999], a pattern of skilled immigrants leading innovation and creating jobs and wealth, has become a nationwide phenomenon. Here are some characteristics of the engineering and technology companies started in the U.S. from 1995 to 2005.

• In 25.3% of these companies, at least one key founder was foreign-born. States with an above-average rate of immigrant-founded companies include California (39%), New Jersey (38%), Georgia (30%), and Massachusetts (29%).
• Below-average states include Washington (11%), Ohio (14%), North Carolina (14%), and Texas (18%).
• Nationwide, these immigrant-founded companies produced $52 billion in sales and employed 450,000 workers in 2005.
• Indians have founded more engineering and technology companies in the US in the past decade than immigrants from the U.K., China, Taiwan and Japan combined. Of all immigrant-founded companies, 26% have Indian founders.
• Chinese (Mainland- and Taiwan-born) entrepreneurs are heavily concentrated in California, with 49% of Mainland Chinese and 81% of Taiwanese companies located there. Indian and U.K. entrepreneurs tend to be dispersed around the country, with Indians having sizable concentrations in California and New Jersey and the British in California and Georgia.
• The mix of immigrants varies by state. Hispanics constitute the dominant group in Florida, with immigrants from Cuba, Columbia, Brazil, Venezuela, and Guatemala founding 35% of the immigrant-founded companies. Israelis constitute the largest founding group in Massachusetts, with 17%. Indians dominate New Jersey, with 47% of all immigrant-founded startups.

• Almost 80% of immigrant-founded companies in the US were within just two industry fields: software and innovation/manufacturing-related services.
• Immigrants were least likely to start companies in the defense/aerospace and environmental industries. They were most highly represented as founders in the semiconductor, computer, communications, and software fields.

We estimate, based on an analysis of the World Intellectual Property Organization (WIPO) patent databases, that foreign nationals residing in the U.S. were named as inventors or co inventors in 24.2% of international patent applications filed from the U.S. in 2006. Unlike the company founder survey, this count does not include such immigrants who became citizens before filing a patent. We therefore classified the foreign nationals as “immigrant non-citizens”. WIPO PCT applications represent a subset of those filed with the U.S. Patent and Trademark Office but are likely to have a high global utility and contribute to U.S. competitiveness.

• The trend has been dramatic; according to our estimates the contribution of non-citizen immigrants to these international patent applications increased from 7.3% in 1998 to 24.2% in 2006.
• The largest group of immigrant non-citizen inventors were Chinese (Mainland- and Taiwan-born). Indians were second, followed by the Canadians and British.
• Immigrant non-citizens filed more theoretical, computational and practical patents than mechanical, structural or traditional engineering patents.

To understand the role of regional technology centers in fueling the growth of engineering and technology companies, we did a special analysis of Silicon Valley, CA and Research Triangle Park, NC. Here are the findings of our analysis of engineering and technology companies founded from 1995 to 2005 in these regions:

• Over half (52.4%) of Silicon Valley startups had one or more immigrants as a key founder, compared with the California average of 38.8%.
  
• A comparison with Saxenian’s 1999 findings shows that the percentage of firms with Indian or Chinese founders had increased from 24% to 28%. Indian immigrants outpaced their Chinese counterparts as founders of engineering and technology companies in Silicon Valley. Saxenian reported that 17% of Silicon Valley startups from 1980-1998 had a Chinese founder and 7% had an Indian founder. We found that from 1995 to 2005, Indians were key founders of 15.5% of all Silicon Valley startups, and immigrants from China and Taiwan were key founders in 12.8%.
• In Research Triangle Park, 18.7% of startups had an immigrant as a key founder, compared with the North Carolina average of 13.9%. Indians constitute the largest immigrant founding group, with 25% of startups, followed by immigrants from Germany and the U.K., each with 15%.

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