As debates about immigration intensify, particularly in the U.S. and Western Europe, countries should consider that many entrepreneurial migrants are job creators. Given this, should societies be so quick to hang "keep out" signs?
A 2012 study based on Current Population Survey (CPS) data from the U.S. Census Bureau, found that migrants are more likely to start a business in any given month in the U.S. According to this study, in 2010, for every 100,000 immigrants, 620 started businesses each month. The rate for native-born adults, however, was much lower, at 280 new startups per 100,000.
The study also found that the existing business-ownership rate is higher for migrants than native-born adults in America: 10.5% of the migrant workforce own a business, compared with 9.3% of the native-born labor force.
A similar study in 2011 by Partnership for a New American Economy found that migrants or their children founded more than 40% of the 2010 Fortune 500 companies in the U.S.
Historically, the U.S. has been able to attract numerous foreign business builders. But does this same pattern emerge for the rest of the world? Gallup's Builder Profile 10 (BP10) database of over 30,000 individuals from 21 countries across the world supports this assumption.
BP10 is a scientifically created, web-based assessment that measures an individual's business-building potential. The term "builder" encompasses various people who are engaged in the process of building something that creates economic energy where none existed before. The BP10 database includes talent data and diverse demographic information on business builders worldwide.
For the purpose of this study, anyone who is a first-generation (Were you born in the country in which you reside?), or a second-generation (Were either of your parents born in another country?), or a third-generation migrant (Were either of your grandparents born in another country?) is considered a "migrant." Those born in the country they currently reside in, whose parents and grandparents were also born in the same country, are considered "native born."
According to the Gallup's BP10 database, migrants have a definite edge in business ownership (34%) compared with native-born Americans (19%). These percentages refer to the ownership of existing businesses in Gallup's database.
Driven by Necessity or Planning?
Gallup analytics indicate that migrants are more entrepreneurial than the native born. Migrants are 1.6 times more likely to have "exceptional" builder talent, as measured by the BP10 assessment, compared with native-born citizens. The higher proportion of exceptional builder talent among migrants is not surprising considering that it takes a certain kind of individual to leave everything behind and move to a new country to start a new life.
This higher level of inherent builder talent among migrants then translates into a higher proportion of migrants starting businesses. Gallup found that migrants are twice as likely to be business owners as the native born. The recent global economic crisis may also be a contributing factor: Studies indicate that higher business rates among migrant populations might be influenced by necessity when jobs are scarce.
Gallup also found that migrant business-owners are two times as likely to plan to increase their employee base and twice as likely to have high growth aspirations compared with native-born business owners.
Though migrants start more businesses and have high growth aspirations for their businesses, Gallup's analysis supports findings from other studies that fewer migrant business owners hire employees. In Gallup's BP10 database, 57% of migrant business owners are employers (have at least one employee) versus 59% of native-born business owners. The migrant-owned firms also tend to be smaller, with only 4.5% of businesses with an annual revenue above $5 million compared with 5.5% for native-owned companies.
Gallup data also show that migrants' business-building rates are the highest in the professional, scientific and technical services sector (21%), followed by the educational services sector (11%). This finding is similar to a 2012 Kauffman Foundation study, which found that nearly a quarter of engineering and technology companies started between 2006 and 2012 in America had at least one founder who was born outside the U.S. In Silicon Valley, the share was 43.9%.
Studies also indicate the share of companies that export goods and services is also higher for migrant-owned than for native-owned businesses (7.1% vs. 4.4%). In their 2012 paper, Robert W. Fairlie and Magnus Lofstrom suggest that the presence of existing networks in migrants' home countries that can be used to grow their businesses is one reason migrants export more goods and services.
Besides starting businesses at significantly higher rates, migrants are also awarded a higher number of patents compared with the native born. A 2007 Kauffman Foundation study found that migrants filed 26% of patent applications in 2006. Another study conducted by the Partnership for a New American Economy in 2011 found that migrants were named in three out of four patents at America's top 10 patent-producing research universities.
With the evidence cited above of the economic benefits migrants can bring, countries need to get creative about attracting and retaining talented foreign-born business builders to boost their economic growth and create jobs. Below are some policy recommendations:
- The majority of migrants move to another country for economic reasons, that is, to work. Make it easy for those on work visas to start companies by removing restrictive visa policies. For instance, in the U.S., H1-B visas should be converted to "startup visas" if migrants start a business and hire a minimum of one employee.
- International students graduating from U.S. universities are authorized 12 months of full-time optional practical training in the area of their study (36 months for those who receive science, technology, engineering and math degrees) while they are on F-1 visas. Offering a similar program to international students who choose to start a business after graduation would spur business-building activity. Giving these students 36 to 48 months of startup practical training would help them get the time they need to set up businesses related to their field of study.
- Provide easier access to credit for migrants who start businesses and hire a minimum of one employee.
- Provide support programs and mentorships to migrants who start businesses.
This analysis draws on Gallup BP10 data collected between 2015 and 2016 for 35,559 respondents (age 14 and older) from 21 countries who took the BP10 assessment. Of the respondents, 8,222 were immigrants (first-, second- and third-generation immigrants combined) and 25,162 native-born residents. Though this is not a probability-based sample, it is large and diverse enough to provide a robust sample of migrants for analysis. The study included countries with a minimum of 80 completes on Gallup's BP10 assessment, including the U.S., Mexico, Canada, Australia, South Africa, Japan, the U.K., Germany, Singapore, India, New Zealand, China, the Philippines, the Netherlands, Switzerland, Colombia, Czech Republic, Poland, France, Brazil and Denmark.