While it’s well established that high-skilled immigrants are major drivers of entrepreneurship in the United States, immigrant founders are often naturalized citizens or permanent residents. Inara Tareque, a doctoral candidate in the Management Division at Columbia Business School, wondered whether H-1B visa immigrants — i.e., skilled immigrants on work visas — might also contribute to entrepreneurship, beyond their direct labor in joining new companies. After all, regulations governing H-1B visas prohibit visa holders from working outside of the sponsoring company. Was it possible that some of the growth in entrepreneurship seen in regions with H-1B visa populations could be attributed to a knowledge sharing between the newly arrived immigrants and their local community in the region where they settle?
To answer this question, Tareque enlisted the help of CBS faculty members Dan Wang, the Lambert Family Professor of Social Enterprise, and Jorge Guzman, the Gantcher Associate Professor of Business. Focusing their study on high-skilled immigrants, the trio took advantage of newly released data from the US Department of Labor on the geographic destinations of new H-1B visa holders. They also utilized data from the Startup Cartography Project, a publicly accessible data set collected by Guzman and other colleagues. The project assesses not only the number of new regional startups but also their quality, as measured by markers like patent holdings and corporate status.
Key Takeaways from the Research
- High-skilled immigrants fuel regional entrepreneurship.
- Evidence points to an indirect effect on regional entrepreneurship when immigrants share valuable knowledge that can benefit the growth of existing startups.
- When regions experience increases in H-1B visa immigrants, new startups tend to be of higher quality, with more opportunity for growth.
- Increasing the number of H-1B visa immigrants in a region can drive economic growth as much as other strategies like state tax credits and infrastructure improvement — but without the cost.
The Knowledge Transfer Effect
The study’s findings were dramatic: A doubling of H-1B immigrants to a region was followed by a 6 percent increase in regional entrepreneurship within three years. The researchers are quick to acknowledge that many mechanisms play a role in driving entrepreneurship, such as immigrants choosing to migrate to regions with the right ingredients for entrepreneurship. But even after controlling for those factors, they still saw a significant, unexplained economic effect — one that can be plausibly accounted for by knowledge transfer.
“When high-skilled immigrants move into a region in the United States, they don’t just bring labor. They bring knowledge and ideas, and those ideas become channeled and translated through networks, ties, and social links, which are typically hard to observe,” Wang says. “It leads to expansion of the entrepreneurial ecosystem that these new immigrants don’t directly contribute to as employees but have a profound impact on.”
What’s more, the magnitude of the new immigrant effect held up across all regions, from areas already densely populated with H-1B immigrants, like the New York metropolitan area, to smaller regions like Kansas City, Missouri. “It really surprised me how robust the findings were, even after removing the big immigration centers,” Tareque says.
The researchers note a few salient aspects of this study. First, the relationship between immigration and entrepreneurship holds only for high-skilled H-1B visa holders. Low-skilled, or H-2B, immigrants, who may well provide other benefits to a community, do not spur regional high-growth entrepreneurship within three years of immigrating. Second, the presence of an existing co-national community for new H-1B visa holders in the region amplifies the entrepreneurial benefits that skilled immigrants bring. Third, the high-skilled immigrants must be newly arrived to spur this growth.
The study points the way to more research that remains to be done, particularly in affirming the causal relationship that is so strongly suggested. Further studies could explore the exact nature of knowledge transfer — whether it mainly entails industry-specific knowledge or more general entrepreneurial know-how that transcends a specific industry. And although Indian nationals make up 70 percent of all H-1B visa recipients and thus were the focus of this study, expanding this research to other nationalities remains an important area of investigation.
Implications for Government and Business Leaders
Tareque, Guzman, and Wang hope the findings of their research will inform policy decisions in the future. They note that the annual cap of 85,000 H-1B visas has remained unchanged since 1990, despite an economy increasingly driven by technology and reliant on knowledge workers. Opening the doors to more skilled immigrants provides an economic boost comparable to what state tax credits for research and development or infrastructure improvements provide — but without the associated costs. For policymakers, it could be an easy win.
The consistency of the results across geographic regions also suggests an opportunity to stimulate regions outside of the main immigrant hubs. Adding 50 additional H-1B immigrants to the already immigrant-dense New York metro area represents a modest gain of only 0.3 percent. In contrast, those same 50 immigrants added to the workforce in Mobile, Alabama — an increase of almost 200 percent — could be expected to boost startup activity by 12 percent.
“Based on our results, the simplest and lowest cost action the United States can take to immediately boost its entrepreneurial growth and GDP is to welcome more skilled immigrants,” Wang says. “To see the profound effect it has is really quite remarkable.”
Adapted from “High-Skilled Immigration Enhances Regional Entrepreneurship” by Inara S. Tareque, Jorge Guzman, and Dan Wang of Columbia Business School.
