Immigrant Startup Founders Score Higher Than US Colleagues On Almost All Innovation Measures

Which may be why so many successful startups have at least one immigrant founder. JL

Cassie Werber reports in Quartz:

Over half of America’s most highly-valued tech companies were founded by first or second generation immigrants.Having a founder or owner who isn’t US-born can give firms an advantage in innovation across almost all measures. Researchers found immigrant owners and founders outperformed native owners and founders in every one of the 16 measures of innovation they analyzed except one: copyright and trademarks. Immigrant scores remained higher when researchers controlled for level of education and startup funding.

Tech start-ups are always looking for an edge. Now research has emerged that having a founder or owner who isn’t US-born can give firms an advantage in innovation across almost all measures.

Researchers from the National Bureau of Economic Research, a long-established nonpartisan non-profit, set out to answer the question: How much do immigrants contribute to innovation in the US tech sector? The researchers drew a sample of about 11,000 owners of high-tech firms from the Annual Survey of Entrepreneurs, a 2014 database created by the US Census Bureau. (The entire survey comprises about 290,000 firms and represents a random sample of all nonfarm businesses.)

The NBER research selected 16 measures specific to innovation, including “reported innovation activities in both products and processes,” efforts made in research and development, and the seeking or securing of trademarks, copyrights, and patents.

They found that immigrant owners and founders outperformed native owners and founders in every one of the 16 measures of innovation they analyzed except one: The category comprising copyright and trademarks. In identifying so many categories, the researchers wrote, they were seeking to go beyond more traditional measures of innovation, like simply looking at secured or pending patents alone. The results were recently published as a working paper.

Immigrants’ higher scores were not statistically significant in every single measure where they outperformed natives, but in most they were. Also, in most cases, immigrant scores remained higher when the researchers controlled for other factors like level of education and startup funding received.

“The main exception is owning a copyright or trademark, the most marketing-related activities measured here. Otherwise, the data imply a robust immigrant advantage in innovation,” they wrote.

The NBER study used place of birth to determine a person’s status as either American or immigrant, focusing solely on first generation immigrants and their US peers. A 2018 report by Mary Meeker, a prominent analyst of the internet, found that over half of America’s most highly-valued tech companies were founded by first or second generation immigrants.

The researchers did not come to any firm conclusions about why immigrants might be more innovative high-tech business owners than their US-born counterparts. They noted that immigrant owners come from a better-educated pool than their US-born counterparts—but the researchers also noted that differences in innovation persisted when they controlled for education. Immigrants also tended to operate younger firms; but the researchers also noted that the immigrant advantage persisted when they controlled for firm age, and was seen in both younger and older firms.

The NBER paper suggests a number of ways in which the research could usefully be extended, like comparing tech to other industries. For now, though, the findings seem to be a boost to immigrant-owners: A group that appears from the data to be responsible for some of America’s prized leadership in enterprising tech.