The Link Between Small Business and Immigration

Addressing Facebook employees last April, Obama said “We want more Andy Groves here in the United States…we don’t want them starting Intel in China or starting it in France.” When discussing the state of American technological progress and small business, it’s impossible to separate it from the ongoing debate on immigration.

According to the Bureau of Justice Statistics (BJS), 18% of small businesses are owned by immigrants, while they form only 11.5% of the population. Not only that, foreign-born entrepreneurs are responsible for 80% of the new jobs in the US, annually.

The percentage of small businesses owned by immigrants also significantly rises in surveys of America’s most economically productive cities.

A recent study reported in the New York Times pegs 48% of small businesses in New York City as being run by immigrants, while they constitute a little over a third of the population. Other major cities in the US, including Seattle, Los Angeles, San Francisco, Boston, and Miami trend towards the same direction.

Despite the contributions immigrants have made in providing jobs and services, Immigration is still a hot button topic- and you can expect it to get hotter with the coming elections.

Immigration IS NOT a Zero-sum Game

Statistically and historically speaking, immigrants have always been responsible for generating more jobs than they are taking away- if that can actually be said to be true. Evidence actually points to immigration preventing the loss of local jobs due to overseas outsourcing.

Illegal immigration (indeed, immigration in general) has become a boogeyman for all sorts of other issues ranging from terrorism to unemployment. But the fact is, immigration has proven inseparable not just from small business, but also from the US’s  technology industries.

Google’s Sergei Brin, Sun Microsystem’s Vinod Khosla, YouTube’s Steve Chen and Jawed Karim, Yahoo!’s  Jerry Yang, Intel’s Andy Grove, and PayPal’s Elon Musk are just some of the many immigrants that have led their start-ups to massive success. Even UPrinting.com’s founder, Ronnie Mesriani, is himself an immigrant. Foreign-born scientists and engineers are fueling technological development, which in turn creates more job opportunities.

Entrepreneurship is Not a Walk in the Park for Immigrants

Foreign-born entrepreneurs  have come to dominate many key service-oriented local industries in all major US cities. However, enterprises started by immigrants are also significantly more likely to fail, or become stagnant compared with businesses opened by native-born Americans.  Reasons range from unfamiliarity with American culture and legal requirements to less aggressive investment and capital acquisition compared with native-born entrepreneurs.

Businesses started by immigrants also tend to be less profitable compared to ones started by native-born counterparts. They may also be reluctant to hire people from certain races based on stereotypes – causing friction when they set up shop in some communities.

Implications of Losing Foreign Talent

Overall, hard data and serious studies show that the effect of immigration has been positive on the American economy. They are without a doubt very important cogs in the American economic machine.

But high living costs, concerns about the recession and ill-conceived anti-immigration legislation have led increasing numbers of foreign entrepreneurs going back to their home countries, or setting up shop elsewhere. Whenever this happens we can say goodbye to all the value they would have created.

If these trends continue, and if we keep blaming immigration for actually taking away local jobs, the next Google might very well come from outside the US.