Immigrants and Entrepreneurship

Embracing Immigrant Entrepreneurs

Every day Sharan Gahunia, owner of Raja Sweets in the Hillcroft area of Houston, Texas, sells mithai and other Indian pastries in the shop her father founded over 30 years ago. When Raja Sweets first opened up, there was little South Asian cuisine and culture within Houston, but through hard work and entrepreneurship, South Asian immigrants like Gahunia have helped turn the Hillcroft area into a booming cultural center officially recognized as the Mahatma Gandhi district.

Immigrant entrepreneurs like the Gahunia family are a key factor in American small business and entrepreneurship. 

Where are Immigrant Entrepreneurs from?

Immigrant entrepreneurs are a diverse and growing group. According to statistics from the 2013 American Community Survey, the vast majority of immigrant business owners, 23.4%, originate from Mexico, reflecting the large and long-standing Mexican immigrant population in the United States. The next three countries of origin in terms of raw number of business owners are Korea with 5.1% and India and Vietnam with Houston's Chinatown is home to many immigrant-run small businesses. https://commons.wikimedia.org/wiki/File:MetropoleCenterHoustonTX.jpg4.1% each.

Examining the percentage of business owners by country of origin provides further insight. Iran appears to be the largest exporter of entrepreneurs, with nearly 1/4, or 24.4%, of Iranian immigrants in the U.S. owning a business. The next three countries of origin with the highest rates of business ownership are South Korea with 23.1%, Brazil with 21.0% and Italy with 20.1%.

Educational Extremes and Type of Work

The survey also shows that the distribution of educational degrees among immigrant entrepreneurs is statistically bimodal. 29.8% of immigrant business owners possess a college degree, yet 25.7% of them, the second largest portion, do not have a high school degree. This wide range of educational backgrounds may reflect differences in the immigrant entrepreneur’s countries of origin.

Immigrant entrepreneurs tend to live in the larger states, with 27.8% in California, 11.8% in Florida, 10.7% in New York and 10.5% in Texas. Most immigrant entrepreneurs own either construction or professional service firms, representing 17.2% and 16.7% of all immigrant owned small businesses, respectively. However, the type of work immigrant entrepreneurs engage in is diverse, ranging from agriculture to wind-power generation. A surprising 16.2% of all immigrant owned business fall into the impossible to categorize category “other.”

Small Business Entrepreneurs

In 2012 the Small Business Administration reported higher rates in business ownership and business formation among the U.S. immigrant population as compared to the non-immigrant population. The SBA further found that immigrant-owned businesses tend to export to the global market at a disproportionately higher rate as well.

In 2014, the Kauffman Foundation found that the percentage of small businesses owned by immigrants more than doubled from 13.3 % in 1996 to 28.5% in 2014. The foundation also showed that immigrants did as well or better than native-born entrepreneurs with “opportunity entrepreneurship.” Immigrants are skilled at finding and filling market gaps — such as the unmet demand for Indian pastries the Gahunia family exploited.

Research even suggests that immigrant entrepreneurs perform better as compared to non-immigrant entrepreneurs. In a 2015 study, economists Robert Fairlie and Magnus Lofstrom found that immigrants were well suited to entrepreneurship. They listed ties with already existing immigrant populations, high amounts of family savings, and a lack of pre-existing career, as factors the may make immigrant entrepreneurs particularly successful.

High-technology Entrepreneurship

In the world of high-technology, high growth entrepreneurship, the National Venture Capital Association (NVCA) reported that, “If immigrant-founded venture-backed public companies were a country, then the value of its stock exchange would rank 16th in the world, higher than the exchanges of Russia, South Africa and Taiwan.”  These trends hold for privately held venture-backed companies as well. The study found that immigrant entrepreneurs started 30% of these businesses.

Even outside of high-growth start-up firms, immigrants have a strong positive impact in high-technology. For example, the University of Michigan showed that total computer science employment would have been 3.8% between 9.0% lower if immigration were held at 1994 levels.

 

Looking toward the Future

The NVCA study reported that 78% of immigrant entrepreneurs started their business while either on an H1B employer-sponsored or a F-1 international student visa. Overall, there is strong evidence that immigrants perform better as entrepreneurs than native-born individuals and that they are a boon to the U.S. economy. Reforming immigration policy to encourage yet more immigrant entrepreneurs would therefore contribute to America’s prosperity in the 21st century.

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