The United States is losing immigrant entrepreneurs to Canada through the Start-Up Visa, in addition to international students and skilled tech immigrants.
That’s according to a new study by Saerom (Ronnie) Lee and Britta Glennon of the Wharton School at the University of Pennsylvania.
“To stimulate entrepreneurship and economic growth, a growing number of countries have adopted immigration policies that provide visas to skilled entrepreneurs,” says the abstract of the research paper, titled The Effect of Immigration Policy on Founding Location Choice: Evidence from Canada’s Start-Up Visa Program.
“This paper examines whether this policy affects the founding location choice of immigrant founders, using the introduction of Canada’s Start-Up Visa Program in 2013.
We show that this immigration policy increased the likelihood of US-based immigrants starting a business in Canada by 69%.”
In focusing on the variable of “immigration policy” to determine the location of entrepreneurial start-ups, the study uses a unique Revelio Labs dataset of 1.2 million U.S.-based individuals who “started a business in either the U.S. or Canada between 2006 and 2021” and held at least a bachelor’s degree.
Using this cross-border, longitudinal dataset, the authors show that Canada’s start-up visa programme has increased the likelihood of U.S.-based immigrants starting a business in Canada by 69% since its introduction in 2013.
Of these, immigrants of Asian origin to the United States were the most likely to start a business in Canada.
“Moreover, our results suggest that this responsiveness varies according to the presence of Asian immigrants in their previous location. That is, the larger the Asian immigrant enclaves in the place of origin, the less likely US-based Asian immigrants in that place are to move to Canada to start a business.”
“Taken together, these findings not only imply that immigration policy has a significant impact on the location decision to start a business, but also reinforce the idea that this decision involves a complex weighting of multiple location factors – in particular, social ties and embeddedness. In other words, immigrant would-be founders appear to weigh the presence of co-ethnic immigrant communities against immigration policy when choosing their founding location”.
Immigration policy as a whole
Another theoretical finding of the research was that the analyses of variation at the Metropolitan Statistical Area (MSA) level suggest that the propensity of immigrants to migrate to Canada to start a business varies with the size of co-ethnic immigrant communities; immigrants in MSAs with larger co-ethnic immigrant populations are less likely to leave and move to Canada to start a business.
The study found that immigration policy as a whole is a significant independent variable in the location decision of entrepreneurs. It also found that immigrants are more likely to start new businesses and contribute to the success of those businesses as both founders and managers.
A Forbes article on this paper by Stuart Anderson reinforces this point by highlighting how recent studies show that immigrant entrepreneurs are essential to the American economy.
According to research by the National Foundation for American Policy (NFAP), immigrants have founded more than half of US startups valued at $1 billion or more.
“Nearly two-thirds (64%) of U.S. billion-dollar companies (unicorns) were founded or co-founded by immigrants or the children of immigrants,” the study says.
“Nearly 80% of America’s unicorns (privately held billion-dollar companies) have an immigrant founder or an immigrant in a key leadership role, such as CEO or vice president of engineering.”
Other research also shows that immigrant entrepreneurs are essential to artificial intelligence entrepreneurship, which only reinforces the claim that their movement north is damaging US economic growth prospects.
“Immigrants have founded or co-founded nearly two-thirds (65%, or 28 of 43) of the top AI companies in the United States, and 70% of full-time graduate students in fields related to artificial intelligence are international students,” according to an NFAP analysis.
“Seventy-seven percent of the top US-based AI companies were founded or co-founded by immigrants or the children of immigrants. Forty-two percent (18 out of 43) of the top US-based AI companies had a founder who came to America as an international student.”
Strong entrepreneurial ecosystem
The policy implications of Glennon and Lee’s paper relate firstly to the efforts of governments around the world to develop policies to attract companies and build a strong entrepreneurial ecosystem within their national borders.
Since 2010, more than 20 countries (including Canada, Chile and South Korea) have introduced start-up visa programmes, which are immigration policies that provide visas to highly skilled foreign-born entrepreneurs.
These visas – such as Canada’s start-up visa – can be a useful tool for countries competing for global talent to attract immigrants and promote immigrant entrepreneurship within their borders, according to the study.
The United States does not have such a start-up visa, but business groups and venture capital firms have been supporting immigrant start-up legislation for more than a decade.
The lack of a start-up visa means that foreign nationals do not start businesses in the United States until they become green card holders.
“Our paper suggests that if the US were to adopt a start-up visa programme for immigrants, we would see a significant increase in entrepreneurship in the US,” Glennon said in an interview.
