Study: Immigrants in the United States are more likely to start businesses and create jobs | MIT News

According to a study that takes an in-depth look at registered businesses across the country, immigrants to the United States are more likely to start businesses than native Americans.

Co-authored by an MIT economist, the study finds that, on a per capita basis, immigrants are about 80% more likely to start a business than US-born citizens. These companies also have about 1% more employees than those founded by Native Americans, on average.

“Immigrants, relative to natives and relative to their share of the population, found more businesses of all sizes,” says Pierre Azoulay, economist at MIT Sloan School of Management and co-author of a published paper detailing the results of the study.

Controlling for business creation, the results indicate that immigration to the United States is associated with a net gain in job availability, contrary to the common perception that immigrants fill jobs that native-born workers do. United States would have otherwise.

“Findings suggest that immigrants act more as ‘job creators’ than ‘job takers,’ and that foreign-born founders play an outsized role in high-growth American entrepreneurship,” write the authors. authors in the article.

The article, “Immigration and Entrepreneurship in the United States,” appears in the spring issue of US Economic Review: Insights. The authors are Azoulay, professor of international program management at MIT Sloan; Benjamin Jones, Gordon and Llura Gund Professor of Entrepreneurship and Professor of Strategy at Northwestern University’s Kellogg School of Management; J. Daniel Kim PhD ’20, assistant professor of management at the Wharton School of the University of Pennsylvania; and Javier Miranda, senior economist at the US Census Bureau.

Three business scales

To conduct the study, the researchers looked at three types of data sources. To start, the researchers used US Census Bureau data and tax records of all new businesses started in the United States from 2005 to 2010, a total of 1.02 million businesses. This allowed them to study the creation of businesses and the growth of employment in these businesses over a period of five years.

Of course, many U.S. companies were founded before 2005. To analyze these companies and their founders, the research team looked at the 2012 U.S. Census Bureau Survey of Business Owners, a periodic survey with data covering 200,000 businesses and including data on owners. This allowed the researchers to extend the study period and include many large companies.

However, many of the largest companies in the United States do not respond to the survey of business owners. For this reason, the research team also analyzed the 2017 fortune 500identifying the citizenship and immigration status of the founders of 449 of these companies.

Ultimately, the study showed that 0.83% of immigrants to the US started a business between 2005 and 2010, while 0.46% of native-born US citizens started a business during that time. . This disparity – the 80% higher start-up rate – also held true among firms founded before 2005.

“Immigrants found more businesses in each bucket,” Azoulay says. “They’re creating more companies, they’re creating more small companies, they’re creating more medium-sized companies, they’re creating more large companies.” He adds, “It’s not the case. [immigrants] create only growth-oriented startups. They’re not, they’re just creating subsistence businesses. They’re creating all kinds of businesses, and they’re creating lots of them.

Azoulay points out that the study, which focuses on empirical facts about business creation, does not explain why immigrants tend to start businesses more often. Some immigrants, finding it difficult to access the American labor force as employees, may set up service businesses instead.

Alternatively, some immigrants to the United States arrive as students, stay in the country, and found high-growth, high-tech start-up companies. The magnitude of the overall trend suggests that there are likely several such scenarios in play at once.

“There can only be one explanation,” says Azoulay. “There’s probably a different story for companies that end up getting big and for companies that start small and stay small.”

Facts for a larger discussion

As the researchers note, it is not always easy to determine whether a company’s founders are immigrants. Some companies have multiple founders, representing a mix of immigrants and native-born people.

To solve this problem, the researchers tested several ways to classify company data. In one iteration of the analysis, they distributed the credit for starting a business proportionally among the founders. In another iteration, they only credited a company as having been founded by an immigrant if the “primary” founder was an immigrant. Another set of analyzes defined a company as being founded by immigrants if one of the founding team members was an immigrant. All of these methodologies produced the same large-scale trend.

Indeed, as the authors write in the article, “immigrants appear to play a relatively large role in expanding labor demand relative to labor supply, for relative to the native-born population.

Azoulay notes that immigration policy debates can have many dimensions and don’t always revolve around economics. Yet when it comes to this economic impact, and specifically the issue of job creation and availability, Azoulay hopes the study will provide baseline data points for public consumption.

“Any discussion must start from a common set of facts,” says Azoulay.

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