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Fewer Immigrants Starting Businesses in US

startup . / Credit: Start a Busienss Image via Shutterstock

The number of immigrant entrepreneurs in the U.S. is on the decline, new research finds.

A study by the Kauffman Foundation shows that the proportion of immigrant-founded companies nationwide has slipped to 24.3 percent, down from 25.3 percent in 2005. The research also found that the drop was even sharper in Silicon Valley, Calif., where immigrant-founded startups declined nearly 10 percentage points to 43.9 percent.

Dane Stangler, director of research and policy at the Kauffman Foundation, said to maintain a dynamic economy, the U.S. must embrace foreign-born entrepreneurs.

"For several years, anecdotal evidence has suggested that an unwelcoming immigration system and environment in the U.S. has created a 'reverse brain drain,'" Stangler said. "This report confirms it with data."

The study found that the exception to this downward trend were immigrants from India. Of the businesses started by foreign-born entrepreneurs, 33.2 percent of them were Indian, an increase of 7 percent since 2005. Other foreign countries producing a high number of business owners in the U.S. include:

  • China
  • United Kingdom
  • Canada
  • Germany
  • Israel
  • Russia
  • Korea
  • Australia
  • Netherlands

When they get to the U.S., immigrants were most likely to start their businesses in the traditional immigration gateway states of California, Massachusetts, Texas, Florida, New York and New Jersey, the study found.

The research revealed that immigrant entrepreneurs, who are most likely to start companies in the innovation/manufacturing-related services and software industries, employed about 560,000 workers and generated an estimated $63 billion in sales from 2006 to 2012.

Vivek Wadhwa, director of research at the Center for Entrepreneurship and Research Commercialization at Duke University, which conducted the study on behalf of the Kaufman Foundation, said at a time when the economy needs job creators, the U.S. is at risk of losing a key growth engine.

"The U.S. can reverse these trends with changes in policies and opportunities, if it acts swiftly," Wadhwa said. "It is imperative that we create a startup visa for these entrepreneurs and expand the number of green cards for skilled foreigners to work in these startups."

From the 107,819 engineering and technology companies founded in the last six years, the study examined a random sample of 1,882 companies through a nationwide survey.

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Chad Brooks

Chad Brooks is a Chicago-based freelance writer who has nearly 15 years experience in the media business. A graduate of Indiana University, he spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including, local and state government, crime, the legal system and education. Following his years at the newspaper Chad worked in public relations, helping promote small businesses throughout the U.S. Follow him on Twitter.