ISSN: 1391 - 0531
Sunday, January 07, 2007
Vol. 41 - No 32
Financial Times  

Immigrant entrepreneurs account for one-quarter of tech startups in U.S.

Foreign-born entrepreneurs were behind one in four technology startups in the United States over the past decade, according to a study to be published.

A team of researchers at Duke University estimated 25.3 percent of technology and engineering companies started between 1995 and 2005 had founders, chief executives, presidents or chief technology officers who were born outside the United States. That is striking, given that just 11.7 percent of the U.S. population is foreign-born, according to U.S. Census data.

Immigrant entrepreneurs' companies employed 450,000 workers and generated $52 billion in sales in 2005, according to the survey.

Their contributions to corporate coffers, employment and U.S. competitiveness in the global technology sector offers a counterpoint to the recent political debate over immigration and the economy, which largely centers on unskilled, illegal workers in low-wage jobs.

''It's one thing if your gardener gets deported,'' said the project's lead researcher, Vivek Wadhwa. ''But if these entrepreneurs leave, we're really denting our intellectual property creation.''

Wadhwa, the Delhi-born founder of two tech startups in North Carolina's Research Triangle, is Duke's executive in residence. ''America's advantage is we can get the best and brightest from around the world,'' he said. ''Let's make the most of it.''

The study comes nearly eight years after an influential report from the University of California, Berkeley, on the impact of foreign-born entrepreneurs.

AnnaLee Saxenian, now dean of the School of Information at UC-Berkeley, estimated immigrants founded about 25 percent of Silicon Valley tech companies in 1999. The Duke study found the percentage had more than doubled, to 52 percent in 2005.

California led the nation, with foreign-born entrepreneurs founding 39 percent of startups, compared to 25 percent of the state's population.

In New Jersey, 38 percent of tech startups were founded by immigrants, followed by Michigan (33 percent), Georgia (30 percent), Virginia (29 percent) and Massachusetts (29 percent).

Saxenian, also co-author of the new study, said the research casts new light on the immigration debate, debunking the notion that immigrants who come to the United States take jobs from Americans.

''The advantage of entrepreneurs is that they're generally creating new opportunities and new wealth that didn't even exist before them,'' Saxenian said.

''Just by leaving your home country, you're taking a risk, and that means you're willing to take risks in business. You put them in an environment that supports entrepreneurship, and this is the logical outcome.''

Researchers polled executives at 2,054 tech startups, each with more than $1 million (euro760,000) in revenue and at least 20 employees. Researchers were 95 percent confident that their results could be accurately extended to more than 28,000 engineering and technology startups founded nationwide between 1995 and 2005. Immigrants were most likely to start companies in the semiconductor, communications and software niches. They were least likely to enter the defense sector.

One of the study's biggest surprises was the extent to which Indians led the entrepreneurial pack. Of an estimated 7,300 U.S. tech startups founded by immigrants, 26 percent have Indian founders, CEOs, presidents or head researchers, the study found.
Indian immigrants founded more tech startups from 1995 to 2005 than people from the four next biggest sources _ United Kingdom, China, Taiwan and Japan _ combined.

Indians even emerged as the dominant entrepreneurs in Silicon Valley. In Saxenian's 1999 study, Chinese immigrants dominated. (AP)

Rosen Sharma, president and chief executive officer of Palo Alto, California-based management software company SolidCore Systems Inc., was not surprised by the results.

Sharma, 34, leads a company that employs 150 people in offices in the U.S., United Kingdom, Canada and India. He came to America from India in 1993 and has since founded six companies.

''People who come from India are laser-focused on technology. They come here and they learn to tell a story and paint a vision,'' said Sharma, who has a green card and is raising his daughters as U.S. citizens. ''Once you have those two things, you're off to the races.''

The Duke researchers also examined how many non-citizens in the U.S. are applying for patents.

In 1998, foreign-born inventors living in the United States without citizenship accounted for 7.3 percent of patent filings to the Patent Cooperation Treaty of the Geneva-based World Intellectual Property Organization, which coordinates filing of patents that can be enforced worldwide.

By 2006, the percentage had surged to 24.2 percent.

Without permanent citizenship, inventors are more likely to take valuable intellectual property and return to China, India or other countries _ and U.S. companies would have to compete against them, Wadhwa said.

''The bottom line is: Why aren't these people citizens?'' Wadhwa said. ''We're giving away the keys to the kingdom. This is a big, big deal once you figure out what this means for U.S. competitiveness.''

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