Immigrants Play a Disproportionate Role in American Entrepreneurship

Innovation and Economic Growth

Article Snapshot


William R. Kerr and Sari Pekkala Kerr


Harvard Business Review, October 3, 2016


This study considers the long-term growth of firms founded by immigrants in 31 states. Since the 1990s, immigrants have founded a growing proportion of new firms. Immigrants who arrive in the United States as children are most likely to found new firms.

Policy Relevance

Immigrant-founded firms generate many additional jobs. H-1B visa reform is not the best way to encourage immigrant-founded startups.

Main Points

  • Entrepreneurship has declined sharply in the United States economy over the last thirty years, as there are far fewer startups.
  • This study uses data from the Census Bureau to learn about businesses founded by immigrants in 31 states from 1995 to 2008; the data includes large and small firms, those with one or more employees.
  • In the 1990s, immigrants founded about 17% of new firms, but the immigrant share of new firms rose sharply, faster than the increase in immigrant employees.
    • At the end of the study period, 35-40% of new firms have at least one immigrant as a founder.
    • 31% of firms backed by venture capital have an immigrant founder, compared to 25% of all new firms.
  • Immigrants usually launch smaller firms than natives.
    • On average, firms founded by immigrants have 4.4 workers, compared to 7.0 workers for native-founded firms.
    • When the founder team has immigrants and natives, the average is 16.9 workers.
  • Firms founded by immigrants close at a greater rate than native firms, but immigrant firms that survive grow faster and create more jobs.
  • Expanding the H-1B visa program is not a good way to encourage entrepreneurship by immigrants, because H-1B entrants come to the country to take jobs at large firms.
  • Immigrants coming to the United States as children are more likely to start firms than those coming as adults.

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