New research on immigrant entrepreneurship

Here is a very nice piece of scholarly work by Sari Pekkala and William R. Kerr on immigrant entrepreneurship in the US (NBER working paper version here, and here without the requirements to sign up). The paper provides us with some facts to debunk the very common popular belief that “immigrants steal our jobs”, which is a variant of the implicit misconception that the number of jobs in an economy is fixed. I still have to digest the rather long piece but I already quote two interesting paragraphs from the introduction. It turns out that immigrants found more businesses than natives and also create more jobs.

Section 4 provides our trend estimates. Most of our work focuses on 11 states present in the LEHD [Longitudinal Employer Household Dynamics database – author’s note] since 1992, which include California and Florida. We estimate 24% of entrepreneurs in these states from 1995-2008 are immigrants, which broadly corresponds with other studies. As important, this immigrant entrepreneurship share rises from 17% in 1995 to 27% in 2008. Our sample, by coincidence, draws from heavy immigration states. Looking at a sample of 28 states present in the LEHD by 2000, we estimate these numbers may be 3% higher than the total population, with the growth trend being similar. Returning to our focal set of states, the immigrant share among entrepreneurs receiving VC fi…nancing is modestly higher, reaching 30% in 2005 compared to 27% for all fi…rms. In terms of entrepreneurship rates, roughly 2% of
immigrants start a business over a three-year period; 0.1% start a …firm backed by VC …financing. These rates are higher than those we estimate for natives, which is refl‡ected in the fact that immigrants constitute 19% of the LEHD workforce in our sample, less than the entrepreneurship shares reported above.

Section 5 documents basic patterns related to entry, survival, and growth of immigrant versus native businesses. On the whole, the businesses started by immigrant entrepreneurs perform better than native businesses with respect to employment growth over three- and six-year horizons. This is evident in the raw data and mostly persists when comparing immigrant- and native-founded businesses started in the same city, industry, and year. By contrast, immigrant-founded businesses show no advantages with respect to payroll growth, and may in fact generate lower-wage job growth. Combining business survival with growth dynamics, immigrants tend to be engaged in more volatile, up-or-out type dynamics, along the lines described by Haltiwanger et al. (2013) for young businesses and job creation. Most of this effect is captured by the city-industry-year choices made for businesses, versus variation in growth patterns within these cells. Breaking down these aggregate results, the strongest employment growth impacts for immigrants are found in high-wage businesses and high-tech sectors. Conditional on receiving VC investment, however, we do not observe greater business survival, better employment outcomes, or higher likelihood of going public for fi…rms founded by immigrant entrepreneurs. Businesses founded by immigrants who came the United States by age 18 have stronger growth patterns than those founded by immigrants migrating as adults.

Emphasis added by me. The US are a very attractive country for international entrepreneurs to found their start-ups there, because of the huge, integrated market and the well-developed ecosystem (e.g., in Silicon Valley). Thus, a positive association between entrepreneurship and immigration could simply be driven by high-potential founders who explicitly choose to go to the US in order to realize their business idea. But the fact that businesses of founders who already lived in the US since their teenage years grow even stronger provides evidence against this explanation.

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