Imported Entrepreneurs: Foreign-Born Scientists and Engineers in U.S. STEM Fields Entrepreneurship

Margaret E. Blume-Kohout, February 2016

Purpose

The STEM fields—science, technology, engineering and mathematics—are the source of tangible innovations in products and processes that help to spur economic growth. Though many of these advances may occur in established organizations, radical innovation has long been associated with entrepreneurial ventures. Several previous studies have shown that high-growth, high-tech STEM-based businesses in the United States are disproportionately founded by foreign-born scientists and engineers. However, recent data also suggest that immigrants’ rate of participation in U.S. entrepreneurship is slowing.

This report investigates several explanations for differences in STEM entrepreneurship between U.S.-born and foreign-born college graduates. (Note that the definition of STEM entrepreneurs used in this study includes business owners as well as “joiners,” the employees of new startup ventures who share in some risk taking.)

In addition, the report explores reasons for differences in entrepreneurial participation among the foreign-born, including:

• Immigration status and visa eligibility,
• Age of arrival in the U.S. (as a child or an adult),
• Graduation from a U.S. or foreign university, and
• Differences in cultural support for entrepreneurship across countries-of-origin.

Finally, the report examines foreign-born workers’ job satisfaction by citizenship and immigration status. Although it does not ascertain the causes of recent declines in foreign-born entrepreneurship rates, the report suggests opportunities for policy and further research to help spur greater participation in the future.

Overall Findings

U.S.–Foreign STEM Entrepreneurship Gap. The report confirms that the rate of STEM entrepreneurship among U.S.-born college graduates is lower than among their foreign-born counterparts. (See Figure 1.) A substantial percentage of the gap can be attributed to differences in higher education attainment, particularly the choice of undergraduate major. Differences in the distribution of U.S. and foreign-born workers by age, experience, gender, and marital status explain most of the remaining gap, except among immigrants who earned their highest degree in the United States. For this group, the rate of STEM entrepreneurship is almost 4 percentage points higher than for otherwise-similar native-born citizens.

The U.S. Educational Edge. College-educated immigrants who earned their highest degree from a U.S. institution are more likely than native U.S. citizens and other foreign-born workers to engage in STEM entrepreneurship (see Figure 1). Retaining more of these students in the United States post-graduation would tend to boost STEM entrepreneurship rates. Interestingly, whether these U.S.-educated adult immigrants earned graduate degrees in STEM or non-STEM fields had no impact on their probability of STEM business ownership.

Foreign-Educated STEM Entrepreneurship Rates Lag. STEM entrepreneurship rates among those who earned their highest degree abroad were significantly lower than one would otherwise expect. In addition, immigrants in this group who were employed by established organizations were more likely to express dissatisfaction with their job’s level of responsibility and intellectual challenge, indicative of skills-related underemployment. Occupational dissatisfaction and mismatch may spur some immigrants to transition into entrepreneurship, which is associated with significantly greater satisfaction. However, remaining in the U.S. may become increasingly unattractive for others.

Foreign-Educated STEM Grads Are Valuable Startup Employees. Foreign-born, foreign-educated workers who earned STEM graduate degrees outside the United States are more likely to work for startups than established organizations.

The E-2 Treaty Country Connection. Business ownership rates among foreign temporary resident workers from countries that are not eligible for E-2 Treaty Investor visas are lower than one would otherwise expect, based on those individuals’ other characteristics. Relatively few options exist for foreign temporary workers to own and manage businesses in the United States. The most accessible, flexible option is the E-2 Treaty investor visa, which links U.S. residency to investment, management, and operation of a U.S. business.[1] However, citizens of many countries—notably including India and China—are not eligible for E-2 visas; the absence of an equally accessible visa alternative for these foreign temporary resident workers appears to be stifling their participation as business owners in the U.S. economy. Nonetheless, despite the positive effect of E-2 Treaty country citizenship on foreign temporary residents’ probability of business ownership, among STEM business owners we observe one outlier: over one-third (37%) of foreign temporary resident STEM business owners are from India. More research is needed to understand which of the visa mechanisms are most frequently utilized by foreign STEM entrepreneurs.