That’s according to a new study by Saerom (Ronnie) Lee and Britta Glennon of the Wharton School at the University of Pennsylvania.
“To spur entrepreneurship and economic growth, an increasing number of countries have introduced immigration policies that provide visas to skilled entrepreneurs,” reads the abstract for the research paper titled The Effect of Immigration Policy on Founding Location Choice: Evidence from Canada’s Start-Up Visa Program.
“This paper investigates whether these policies influence the founding location choice of immigrant founders, by leveraging the introduction of Canada’s Start-up Visa Program in 2013.
We demonstrate that this immigration policy increased the likelihood that U.S.-based immigrants have a start-up in Canada by 69%.”
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In focusing on the variable “immigration policy” for determining the location of entrepreneurial start-up founding, the study employs a unique Revelio Labs dataset of 1.2 million U.S.-based individuals who “founded a company either in the U.S. or Canada between 2006 and 2021” and held at least a bachelor’s degree.
Utilizing this cross-border, longitudinal dataset, the authors showed that Canada’s Start-Up Visa Program increased the likelihood that U.S.-based immigrants start 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.
“Furthermore, our results suggest this responsiveness varies by the presence of Asian immigrants in their prior location. That is, the larger the Asian immigrant enclaves in the origin location, the less likely that U.S.-based Asian immigrants in this location move to Canada to start a business.”
“Taken together, these findings not only imply that immigration policy has a significant impact on the founding location decisions, but also reinforce the idea that this decision entails a complex weighting of multiple location factors—most notably, social ties and embeddedness. Put differently, when choosing their founding location, immigrant would-be founders seem to weigh the presence of co-ethnic immigrant communities against immigration policy.”
Immigration Policy As A Whole
A further theoretical discovery from the research was that the analyses of metropolitan statistical area (MSA)-level variation suggest that the propensity of immigrants migrating to Canada to start a business varies with the size of co-ethnic immigrant communities; immigrants in MSAs with a larger co-ethnic immigrant population are less inclined to leave and move to Canada to found a business.
The study established that immigration policy as a whole is a significantly impactful independent variable on entrepreneurial founding location decision. Moreover, it contributed significantly to establishing that immigrants are more likely to start new ventures and contribute to start-up success as both founders and managers.
A Forbes story on this paper by Stuart Anderson furthers 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 started more than half of the U.S.’s startups valued at $1 billion or more.
“Nearly two-thirds (64%) of U.S. billion-dollar companies (unicorns) were founded or cofounded by immigrants or the children of immigrants” the study asserts.
“Almost 80% of America’s unicorn companies (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 underlines the claim that their movement northwards is damaging prospects of U.S. economic growth.
“Immigrants have founded or cofounded 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 leading U.S.-based AI companies were founded or cofounded by immigrants or the children of immigrants. Forty-two percent (18 of 43) of the top U.S.-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 are firstly concerned with global governments’ efforts to devise policies to attract ventures and establish a strong entrepreneurial ecosystem within their national borders.
Since 2010, more than 20 countries (Canada, Chile, South Korea included) have introduced start-up visa programs, which are immigration policies providing visas to highly-skilled, foreign-born entrepreneurs.
These visas – such as Canada’s Start-Up Visa – can be a useful tool, as per the study, for countries competing for global talent to draw immigrants and promote immigrant entrepreneurship within their borders.
The United States lacks such a start-up visa provision, but business groups and venture capital firms have supported immigrant start-up legislation for more than a decade.
The lack of a start-up visa means that foreign nationals do not found businesses in the United States until they become green card holders.
“Our paper suggests that if the U.S. were to adopt a startup visa program for immigrants, we would see a significant increase in entrepreneurship in the United States,” said Glennon in an interview.