Why Immigrant Entrepreneurship Is Stalling

New Kauffman Foundation data show skilled immigrants are starting fewer high-tech businesses Photograph by ImagesBazaar/Getty Images

For the first time in decades, the rate of skilled immigrants starting businesses in high-tech industries in the U.S. has plateaued, according to a new report released today by the Kauffman Foundation.

The study, based on responses from 1,882 startups founded after 2005, shows that the proportion of those ventures founded by immigrants nationwide slipped from 25.3 percent in 2006 to 24.3 percent today. In Silicon Valley, it declined from 52.4 percent to 43.9 percent during the same period. Kauffman extrapolates that tech firms with immigrant founders employed about 560,000 workers and generated an estimated $63 billion in sales from 2006 to 2012.

Native-born entrepreneurs aren’t making up the difference. Their startup rate has remained relatively flat over the last 16 years, and declined in 2011, according to Kauffman’s most recent index that tracked new business creation from 1996 to 2011.

The data show the significance of the reverse brain drain—immigrants educated or trained in the U.S. who can’t get green cards—says Vivek Wadhwa, who co-authored the new report and a slim companion book also out today, The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent. “In an academic paper, you can only say so much,” says Wadhwa, who describes himself as a vocal critic of U.S. immigration policy. “I tried to do a book side by side with it in which I laid out everything I learned over the last few years of researching immigration and also documenting what I think the U.S. needs to do” to reform the system. (Wadhwa is an occasional online columnist for Bloomberg Businessweek.)

His prescriptions in the book include increasing the number of green cards available to skilled immigrants, allowing H-1B holders to work for any employer, and passing the latest iteration of the startup visa, which would give foreign entrepreneurs the ability to live in the U.S. and work for the companies they start.

“For entrepreneurs, the startup visa is the single most important one,” says Wadhwa. “If we want a quick boost to American competitiveness—10,000 more startups, 50,000 more startups—then you do a startup visa. It’s a no-brainer.”

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