Academic Literature

Immigrant Entrepreneurs in US – A significantly stronger innovation performance

How do immigrants contribute to the U.S. economy? One relatively understudied dimension of immigrant activity is entrepreneurship. A recent IZA Discussion Paper by J. David Brown, John S. Earle, Mee Jung Kim, and Kyung Min Lee examines measures of innovation for firms owned by entrepreneurs who are foreign-born vs. U.S.-born.

The data come from the Annual Survey of Entrepreneurs, a large random sample survey of U.S. high-tech firms and their owners, and the questions ask about several types of both product and process innovation, several categories of research and development, and copyrights, trademarks and patents. The paper constructs 16 indicators of innovation based upon these variables and compares the performance of immigrant- and native-owned firms for each of them, while controlling for other factors.

The results imply significantly stronger innovation performance by immigrant entrepreneurs for 15 of the 16 measures; the only exception is for copyright/trademark. The immigrant advantage holds for older firms as well as for recent start-ups and for every level of the entrepreneur’s education. The size of the estimated immigrant-native differences in product and process innovation activities rises with detailed controls for demographic and human capital characteristics but falls for R&D and patenting.

Controlling for finance, motivations, and industry reduces all coefficients, but for most measures and specifications immigrants are estimated to have a sizable advantage in innovation. According to the authors, the results suggest that popular accounts of displaced native workers neglect the new ideas brought by immigrants to an economy, with externalities yielding broader benefits.

Chosen excerpts by Job Market Monitor. Read the whole story at Firms owned by immigrant entrepreneurs innovate more

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