Some colleagues have just published a new analysis of high-tech entrepreneurs, and the results are surprising. There has been a lot of talk lately that high tech firms are disproportionally founded by immigrants. But according to my interpretation of this new, and more carefully done, study, that’s not true. Here’s my summary of their results:
Only about 3 percent of the founders of high-impact, high-tech companies are foreigners (about 60 out of 2034). 97 percent are US citizens, and specifically 87 percent are US-born, while 10 percent are naturalized US citizens. Furthermore, most foreign-born founders lived in the US for decades. These founders are statistically very similar to the average US population in terms of birth and immigration status.
What’s the evidence? The study is by David M. Hart, Zoltan J. Acs, and Spencer L. Tracy, Jr.High-tech Immigrant Entrepreneurship in the United States A summary of their report is at http://www.sba.gov/advo/research/rs349.pdf
Here’s the odd part: the authors draw a rather different conclusion from their data than I do. Specifically their lead is “The central finding of the study is that about 16% of the nationally representative sample of high-impact, high-tech businesses that we surveyed count at least one foreign-born person among their founding team.” And indeed, their data does say this. But they failed to make a comparison to the US population in general. And classifying as “immigrant founded” a firm with any foreign-born founders is inherently biasing the results toward a higher number. They report that “of the 205 Immigrant Founded Companies in the sample, more than half [ie. at least 8% of the firms in the sample] were founded only by foreign-born entrepreneurs,” which seems to me more informative than the 16% number.
For what it’s worth, I’m very sympathetic to the view that immigrants have a positive effect on technology and entrepreneurship. My nationalistic perspective is that we (the US) should educate in our universities the smartest kids we can get our hands on worldwide , and then keep them in the US. We’ve always been a nation of immigrants, and there is no reason to change. Of course, there are many nuances and ramifications of this debate.
Here’s my comparison data on the general US population, based on latest-available information from US Census. In 2003 about 11.7 percent of the population was foreign-born. (http://www.census.gov/prod/2004pubs/p20-551.pdf) Of these, only about 40 percent are naturalized US citizens (http://www.census.gov/prod/2003pubs/c2kbr-34.pdf). But corrected for the same average age (or residence time in the US), it looks like very roughly 70 percent of immigrants are naturalized. And, if we adjusted for region of residence, since startups and immigrants both disproportionally reside in some regions, the fraction of immigrants in their sample would probably be even lower than the general population in the same region.
On the other hand, it might be more relevant to look at the status of company founders in the year of founding, rather than today. Presumably fewer of them were US citizens at the time (although the percentage foreign born would be the same). But a similar correction would apply to the immigrant population of the US as a whole, so it’s still not clear that the two would differ meaningfully.
Finally, this research looks well-done to me. It’s only their spin on the executive summary that I disagree with. They seem to have done a much more careful job than previous analysis on this topic, and if you read their report carefully they don’t overstate their results.
[A good comment on this research is at http://www.usnews.com/blogs/capital-commerce/2009/07/16/immigrants-a-driving-force-behind-innovative-firms.html#3323010 . The commenter has delved into the report and extracted some numbers I didn’t notice, that support the view that this research is NOT pro-immigration, at least not directly.]