By Sari Pekkala Kerr & William R. Kerr
DO immigrants take American jobs, or do they help our economy grow? Do immigrants drain our welfare funds, or can they help refill public coffers as our baby boomers retire?
Our recent research aims to address these questions. We have built a platform that uses restricted-access data from the US Census Bureau to explore differences in the types of businesses formed by immigrants and their medium-term survival and growth patterns.
Here are some key findings:
- Immigrants constitute 15 percent of the overall US work force, but they account for around a quarter of US entrepreneurs (which we define as the top 3 initial earners in a new business). This is comparable to what we see in innovation and patent filings, where immigrants also account for about a quarter of US inventors.
- Many discussions around immigration and entrepreneurship focus on start-ups backed by venture capital firms and entrepreneurs seeking high-growth opportunities that could result in the next Starbucks, Facebook or Staples. We have studied the data on firms backed by VC financing. On the whole, immigrant entrepreneurship is somewhat stronger for VC-backed firms, with 31 percent of VC-backed founders being immigrants, compared to 25 percent of all entrepreneurs in 2005.
- Immigrant founders launch firms that are smaller than native-founded firms. The average initial employment for firms founded by immigrants exclusively is 4.4 workers, compared to 7.0 workers for firms launched exclusively by natives. When both types of founders are present, the average is 16.9 workers.
- The firms founded by immigrants close at a faster rate than firms founded by natives, but those that survive grow at a faster rate in terms of employment, payroll and establishments for the next six years.
If we use statistical methods to control for a company’s founding location and industry, immigrant entrepreneurs are more likely to survive than their native peers, but they’re only modestly more likely to experience employment growth, and their payroll growth is slower than that of native-founded firms. Thus, much of the growth and volatility of immigrant firms result from where they are founded.
Sari Pekkala Kerr is a senior research scientist at Wellesley Centers for Women. William R. Kerr is a professor at Harvard Business School.