Education, Entrepreneurship and Immigration

While the contribution of skilled immigrants to America’s technology and engineering startups has been recognized for the past decade as critical to the emergence of many of America’s most entrepreneurial companies and huge, new industries, little has been known about the backgrounds of these immigrant entrepreneurs. What types of education have these technology and engineering entrepreneurs received? Why did they come to the United States?

A report released by the Ewing Marion Kauffman Foundation that tracked the educational backgrounds of immigrant entrepreneurs who were key founders of technology and engineering companies from 1995 to 2005 shows a strong correlation between educational attainment (particularly in science, technology, engineering, and math) and entrepreneurship.

The study shows that 96 percent of immigrant founders of technology and engineering companies held bachelor’s degrees and 74 percent held graduate or postgraduate degrees. Seventy-five percent of the highest degrees among immigrant entrepreneurs were in STEM fields (Science, Technology, Engineering and Mathematics). Moreover, 53 percent of the immigrant founders of U.S.-based technology and engineering companies completed their highest degrees in U.S. universities.

Conducted by researchers at Duke University and the University of California, at Berkeley, the study is a follow-up to a report released in January that showed that in 25.3 percent of technology and engineering companies started in the United States from 1995 to 2005, at least one key founder was foreign-born. Nationwide, these immigrant-founded companies produced $52 billion in sales and employed 450,000 workers in 2005. The majority of these immigrant entrepreneurs came from India, the United Kingdom, China, Taiwan, Japan, and Germany.

The study was based on a series of in-depth interviews with:

• 144 immigrant company founders on their educational attainment, degree types, reasons for entering the United States, and other factors related to their entrepreneurial activities;
• 87 Indian, 57 Chinese, and 29 Taiwanese company founders to ask where they received their undergraduate education, and;
• 1,572 companies in 11 technology centers to determine whether a key founder was foreign-born and the founder’s country of birth.

Among the findings:

• More than half of the foreign-born founders of U.S. technology and engineering businesses initially came to the United States to study. Very few came with the sole purpose of starting a company. Almost 40 percent of immigrant founders entered the country because of a job opportunity, with only 1.6 percent entering the country with the sole purpose of entrepreneurship. They typically founded companies after working and residing in the United States for an average of 13 years.
• Immigrant founders were educated in a diverse set of universities in both their home countries and across the United States. No single U.S. institution stands out as a source of immigrant founders. Similarly, those who received their undergraduate degrees in India or China graduated from a diverse assortment of institutions. Even the famed Indian Institutes of Technology educated only 15 percent of Indian technology and engineering company founders.
• Immigrant entrepreneurs tend to move to cosmopolitan technology centers. The regions with the largest immigrant population also tend to have the greatest number of technology startups. On average, 31 percent of the engineering and technology companies founded from 1995 to 2005 in the 11 technology centers that were surveyed had an immigrant as a key founder. This compares to the national average of 25.3 percent.
• Technology centers with a greater concentration of immigrant entrepreneurs in their state averages include Silicon Valley (52.4 percent), New York City (43.8 percent), and Chicago (35.8 percent). Three technology centers had a below-average rate of immigrant-founded companies: Portland (17.8 percent), Research Triangle Park (18.7 percent), and Denver (19.4 percent).

In a research and policy guide for transforming the U.S. economy toward an innovative entrepreneurial economy published earlier this year, Kauffman Foundation researchers said the nation could benefit from more enlightened immigration policies, designed to attract and retain highly skilled foreign workers and potential entrepreneurs.

About the research team

For more information, visit the Global Engineering and Entrepreneurship at Duke research group, and the UC Berkeley School of Information.