[Cross-posted from Progressive Fix]
A recent
post highlighted the importance of new and young companies to job
creation in the U.S., implicitly raising an important question for
policy makers: How can we increase the number of startups? Assuming it
can be done, such an increase would not solve all of the economic
challenges facing this country, but it would certainly help. New
companies not only create millions of jobs across all sectors of the
economy — they also introduce product and process innovations, boosting
overall productivity.
Saying startups are important is one thing, of course; actually
designing policies to increase their number is something else entirely.
Before making any recommendations, for example, we need to know more
about the universe of startups. Are they more prominent in some sectors
than others? Does the impact of new companies differ across sectors or
geographic regions? Should policy focus on encouraging more new firms,
or on enhancing the growth of those already in existence? How would any
such policies affect established companies, large and small?
Policymaking around entrepreneurship is evidently not clear-cut as
there is still quite a bit we do not understand regarding startups. In
the coming weeks we will try to explore these questions and illuminate
the world of startups for policymakers. We’ll start with the
lowest-hanging fruit of all, though one that may seem like poison to
some in Washington: immigration.
It’s commonly accepted that the United States is a nation of
immigrants, settled and populated by those fleeing persecution, seeking
commercial opportunities in a new land or looking for a fresh start. We
have always recognized the important contributions of immigrants to the
U.S. economy, from entrepreneurs like Samuel
Slater (textile mills) to Andrew
Carnegie (steel) to Andy
Bechtolsheim (Sun Microsystems) to the laborers and workers who
built this country with their hands.
Recently, researchers have begun to paint a broader picture of the
economic role of immigrant entrepreneurs. For example, Vivek
Wadhwa and his research team have
found that, from 1995 to 2006, fully one-quarter of new technology
and engineering companies in the U.S. were founded by immigrants. In
Silicon Valley, the figure was one-half. These firms constitute only a
sliver of all companies, yet contribute an outstanding number of jobs
and innovations to the economy.
It makes sense, then, that if we are seeking to increase the number
of new companies started each year in the U.S., we might look to
immigrants. It turns out that Sens. John Kerry (D-MA) and Richard Lugar
(R-IN) are thinking precisely along these lines, introducing the StartUp
Visa Act (PDF)
in the Senate. This bill would grant a two-year visa to immigrant
entrepreneurs who are able to raise $250,000 from an American investor
and can create at least five jobs in two years. Without question, such a
visa is a good
idea and this legislation hopefully paves the way for future
actions that would reduce the pecuniary threshold and focus more on
job creation.
Quite naturally, however, the promotion of immigrant entrepreneurs
arouses suspicion among those on the right who harbor nativist views,
and those on the left who perceive progressive immigration policies as a
threat to American labor. Such views take the precisely wrong
perspective: immigration, as we have seen, is a core American
value. Immigrant entrepreneurs, moreover, come to the U.S. to make
jobs for Americans, not take them.
Further, many of those who promote immigration as a way to boost
economic growth narrowly focus on “high-skilled” entrepreneurs, those
who might start technology companies. Clearly, as Wadhwa’s research
indicates, such companies are important to American innovation. But we
exclude non-technology entrepreneurs at our peril — every new company,
including those founded by immigrants, represents pursuit of the
American dream. By closing our borders to immigrants in general or
welcoming only those with certain skills, we leave out many who will
start new firms in other industries. If not in the United States, they
will go
elsewhere to start their companies and create jobs.
Entrepreneurs are implicit in Emma Lazarus’ poem: “Give me your
tired, your poor/Your huddled masses yearning to breathe free.”
Entrepreneurs start from nothing and work endlessly to build their
companies, expressing their individual freedom through commerce. Why
should we want to exclude them from the home of entrepreneurial
capitalism?
ADDENDUM: Ben Wildavsky's new book, The Great Brain Race, will be released soon and I highly recommend it to anyone interested in higher education, globalization, and immigration. It is a fantastically written book and, as noted in the title of this post, Ben posits this wonderful notion of "brain circulation." When discussing globalization and immigration and job creation in the very recent past (and, for that matter, still in the present), we have usually spoken in terms like "brain gain" and "brain drain," implying a zero-sum contest between countries and regions. Ben's book makes quite clear that we are moving into a world of brain circulation, wherein people circulate among countries and institutions, starting companies, creating jobs, propagating innovations--adding to the economies of many countries at once.
