A new study published in the Proceedings of the National Academy of Sciences highlights a significant relationship between high-skilled immigration and regional entrepreneurship in the United States. By analyzing newly awarded H-1B visas, the researchers found that when the number of high-skilled immigrants in a metropolitan area doubles, entrepreneurship in that region increases by 6% within three years. These findings suggest that policies promoting high-skilled immigration could boost regional economic growth by fostering new business creation.
While previous research has shown that immigrants are often overrepresented among startup founders, there is limited evidence on whether the presence of high-skilled immigrants, particularly those on H-1B visas, leads to increased entrepreneurship at the regional level. The H-1B visa is a non-immigrant visa that allows U.S. companies to temporarily employ foreign workers in specialty occupations, such as those in science, technology, engineering, and mathematics. The program grants 85,000 new visas annually and is designed to fill skill gaps in the U.S. labor market by bringing in highly educated professionals from abroad.
However, a key challenge in studying the H-1B program is that these visas are tied to a specific employer, limiting the ability of recipients to start their own businesses while working under the visa. The visa holders are typically bound to their sponsoring employer, and although it is possible for an immigrant to start a business and sponsor their own visa, this is rare due to the legal and logistical complexities involved.
Moreover, even though some high-skilled immigrants eventually start businesses, concerns have been raised that they might displace firms founded by native entrepreneurs, creating competition in the local economy. The research team aimed to investigate whether high-skilled immigrants contribute to regional entrepreneurship in ways beyond directly starting businesses themselves, such as by sharing knowledge, fostering innovation, and driving growth within existing local industries. This study seeks to understand if the presence of high-skilled immigrants enhances the overall entrepreneurial ecosystem of a region, benefiting the local economy in broader, less direct ways.
To explore this issue, the researchers used a variety of data sources, including information on H-1B visa approvals from the U.S. Citizenship and Immigration Services (USCIS), labor condition applications from the Department of Labor, and regional entrepreneurship data from the Startup Cartography Project. Their study focused on Metropolitan Statistical Areas (MSAs) across the United States, which are urban regions with populations of at least 50,000 people.
The primary analysis examined the relationship between the number of new H-1B visa recipients in these MSAs and local entrepreneurship over a three-year period. The researchers also accounted for the quality of entrepreneurship, using measures that predicted the likelihood of startup success based on factors such as business registration and intellectual property filings. In addition, the team employed a shift-share instrument to isolate the effects of high-skilled immigration from other factors that might influence both immigration and entrepreneurship, such as local economic conditions.
The results showed a clear positive relationship between the arrival of high-skilled immigrants and regional entrepreneurship. The researchers found that a doubling of H-1B immigrants in an MSA led to a 6% increase in the number of new businesses within three years. This effect was observed even after accounting for the quality of entrepreneurship, indicating that high-skilled immigrants not only contribute to the quantity of startups but also help increase the number of high-potential ventures.
One of the study’s key findings was that this positive effect on entrepreneurship was only observed for new high-skilled immigrants. Continuing H-1B visa holders, who were already living and working in the United States, did not have a significant impact on regional entrepreneurship.
Similarly, the arrival of unskilled immigrants on H-2B visas, who typically work in temporary non-agricultural jobs, did not contribute to increases in entrepreneurship. These results highlight the specific role that new high-skilled immigrants play in driving regional economic dynamism, rather than the broader immigrant population.
The researchers also explored the mechanisms behind these effects and found evidence supporting the idea that high-skilled immigrants enhance regional entrepreneurship through knowledge transfer. In particular, the effect was stronger in regions with a higher concentration of immigrants from the same country, known as immigrant enclaves. This suggests that social networks and cultural ties among immigrants help facilitate the exchange of ideas and resources, further contributing to entrepreneurship in those regions.
Additionally, the study found that high-skilled immigrants working at large, established firms were more likely to contribute to regional entrepreneurship than those at smaller companies, suggesting that knowledge transfer within large organizations plays an important role in promoting new business creation.
But as with all research, the study has some limitations. For example, the researchers did not directly measure knowledge transfer, making it difficult to determine the exact ways in which high-skilled immigrants contribute to local entrepreneurship. Future research could benefit from more detailed data on the specific types of knowledge and skills that immigrants share with local workers and firms.
Additionally, the study focused primarily on the short-term effects of high-skilled immigration on entrepreneurship, examining changes over a three-year period. It is possible that the long-term effects of immigration on regional entrepreneurship could be even more significant, as immigrants gain more experience and legal status, enabling them to start businesses of their own.
Further research could also explore the potential role of other factors, such as access to capital or regional policies, in shaping the relationship between high-skilled immigration and entrepreneurship. The researchers noted that high-skilled immigrants may have a larger impact on entrepreneurship in regions with greater access to financial resources, such as venture capital, or in areas with policies that support business creation. Future studies could investigate how these factors interact with high-skilled immigration to further drive regional economic growth.
The study, “High-skilled immigration enhances regional entrepreneurship,” was authored by Inara S. Tareque, Jorge Guzman, and Dan Wang.