New Data Supports Value Of Immigrants as Entrepreneurs

Editor’s Note: In September, I introduced preliminary research being done by Harvard Business School Prof. School Prof. William R. Kerr and Wellesley College Senior Research Scientist Sari Pekkala Kerr. In April 2018, they issued a report on their findings.  The following reports on key conclusions they draw from their research.  The entire study can be found at: https://www.hbs.edu/faculty/Publication%20Files/17-011_da2c1cf4-a999-4159-ab95-457c783e3fff.pdf

Despite the Trump Administration’s efforts to curb immigration, a Harvard Business School study shows that immigrants continue to be an especially strong force in business entrepreneurship. The study shows that first-generation immigrants create 25% of new businesses in America.

The study entitled “Immigrant Entrepreneurship in America: Evidence from the Survey of Business Owners 2007 & 2012,” researched immigrant entrepreneurship and firm ownership in 2007 and 2012 using the Survey of Business Owners (SBO). The survival and growth of immigrant-owned businesses over time relative to native-founded companies is evaluated by linking the 2007 SBO to the Longitudinal Business Database (LBD).

The key finding is that first generation entrepreneurs create a total of 25% of new businesses as an average for the 50 states. The authors pointed out that number exceeds 40% of new businesses in some states.

Also included in the report’s abstract:  “Asian and Hispanic second-generation immigrants start about 6% of new firms. Immigrant-owned firms, on average, create fewer jobs than native-owned firms, but much of this is explained by the industry and geographic location of the firms. Immigrant-owned firms pay comparable wages, conditional on firm traits, to native-owned firms, but are less likely to offer benefits.”

Other important data from the report:

States where more than 30% of the new businesses started by first-generation immigrants are: California, 42.4%; District of Columbia,42.3%; New York, 39.6%; New Jersey, 38.6%; Hawaii, 30.1%. [All Blue (Democrat) states.]

States showing the lowest numbers of first generation immigrant-formed news businesses include: North Dakota, 5%; South Dakota, 5%; Iowa, 5.7%; Wyoming, 6.3% and Montana. [All Red (Republican) states.]

Many cities seek to attract immigrant entrepreneurs and this economic advantage, such as the Competition THRIVE program in New York City, the O¢ of New Americans in Chicago, the International Institute of St. Louis, and the Welcoming Cities initiatives in places such as Pittsburgh.

Silicon Valley is most frequently discussed, as its immigrant founder share exceeds 50%, along with the broader tech sector.