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Every third tech start-up in US has Indian DNA

The number of technology firms in the US co-founded by the Chinese has also gone up to 8.1% compared to 6.9 in 2005

Bibhu Ranjan Mishra  |  Bangalore 

At a time when the US has started to see a drop in the number of immigrant-founded companies, Indians and Chinese immigrant entrepreneurs have not followed the trend.

According to a recent study by Kauffman Foundation, based on a sample survey, about 33.2 per cent of the co-founders of engineering and companies incorporated in the US during the last six years were Indians. This is an increase of about seven percentage points from what a similar study that examined immigrant-founded companies between 1995 and 2005 found.

The number of companies in the US co-founded by the Chinese has also gone up to 8.1 per cent compared to 6.9 in 2005, it says.

The study, “America’s New Immigrant Entrepreneurs: Then and Now”, is based on a survey among a random sample of 1,882 companies of the total 107,819 engineering and technology companies founded in the last six years in the US. Of those, 456 had at least one foreign-born founder.

Companies founded by immigrants in US from 2006-12
Immigrant founders Tech firms founded in last 6 years (in %)
Indians 33.2
Chinese 8.1
British 6.3
Canadians 4.2
Germans 3.9
Israelis 3.5
Russians 2.4
Koreans 2.2
Australians 2.0
Dutch 2.0
Source: Kauffman Foundation survey

It found the proportion of immigrant-founded companies in the country slipped to 24.3 per cent from 25.3 per cent in 2005. The drop was more pronounced in Silicon Valley, where the percentage of immigrant-founded start-ups declined from 52.4 per cent to 43.9 per cent.

“The exceptions to this downward trend were immigrants from India... Indians, in fact, founded more of the engineering and technology firms than immigrants born in the next nine countries combined,” the study said.

The implications of the findings, conducted by researchers at Duke University, The Berkeley School of Information and Stanford University, have now been encapsulated in a book ‘The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent’. The book has been written by Vivek Wadhwa, director of research at the Center for Entrepreneurship and Research Commercialization at the Pratt School of Engineering, Duke University.

“The US risks losing a key growth engine just when the economy needs job creators more than ever,” said Wadhwa. “The US can reverse these trends with changes in policies and opportunities, if it acts swiftly. It is imperative that we create a start-up visa for these entrepreneurs and expand the number of green cards for skilled foreigners to work in these start-ups. Many immigrants would gladly remain in the US to start and grow companies that will lead to jobs,” he added.

Immigrant founders employed about 560,000 workers and generated an estimated $63 billion in sales from 2006 to 2012. “For several years, anecdotal evidence has suggested an unwelcoming immigration system and environment in the US have created a ‘reverse brain drain.’ This report confirms it with data,” said Dane Stangler, director of research and policy at the Kauffman Foundation.

“To maintain a dynamic economy, the US needs to embrace immigrant entrepreneurs,” he added.

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First Published: Wed, October 03 2012. 00:42 IST