Immigrant Entrepreneurs Score Higher on Innovation, New Evidence Suggests
A new study from Germany’s IZA Institute of Labor Economics found that immigrant entrepreneurs in the U.S. scored higher than non-immigrant entrepreneurs on various innovation measures.
The authors analyzed 11,000 owners of 7,400 high-tech businesses from the US Census Bureau’s Annual Survey of Entrepreneurs (ASE). High-tech industries were defined based on the percentage of STEM employment in the industry.
The authors selected 16 innovation measures based on information in the questionnaire, including reported innovation activities in products and processes, research and development, trademarks, and patents. The results highlight some interesting patterns among immigrant entrepreneurs (defined here as non-citizens at birth):
- Immigrant-owned firms uniformly scored higher than non-immigrant firms on 15 out of 16 innovation measures.
These measures included different types of product innovation, process innovation, and R&D activity. For example, some forms of product innovation included developing a new use for a good or service, or developing goods or services that no other firm offered.
- The only exception to this trend was likelihood of owning a copyright or trademark, where immigrant-owned firms were less like to own a copyright or trademark, or to have a patent granted or pending.
- This pattern was consistent when controlling for several variables like education levels, motivations, and industry.
The immigrant ‘advantage’ increased when controlling for certain variables, and decreased when controlling for others depending on the innovation measure. Overall, however, immigrant-owned firms tended to out-perform non-immigrant-owned firms in innovation measures excluding patents, regardless of factors like the age of the company or the founders’ education level.
The study also uncovered some trends that may help explain this pattern.
- Immigrants were more likely to aspire to owning their own business. Compared to non-immigrants, a higher share of immigrant entrepreneurs said that owning a business was a lifelong dream because it was “the best avenue for their ideas, goods, or services.”
- Immigrants were more likely to own younger firms. The authors found that about half of the immigrant-owned firms started within the five years prior to the study, compared to 63 percent of non-immigrant owned companies founded more than five years previously.
- Immigrant entrepreneurs tended to have higher levels of education. The data also shows that in high-tech industries, having a graduate degree is strongly associated with research and development activities for both immigrant- and non-immigrant owned businesses, but the immigrants with graduate degrees tended to produce more impact and develop more innovative products.
This study is one of the first to focus specifically on innovation measures when understanding trends among immigrant entrepreneurs, and the findings echo previous studies showing the important role played by these founders in the growth of high-tech industries.
Contributed by Xiaohan (Shirley) Wang
The full report can be accessed here.