The United States loses immigrants and international students to Canada. New research shows Canada’s startup visa policy has encouraged immigrants in the U.S. to move to Canada. This follows news that in July 2023 Canada’s program to entice H-1B visa holders to the country attracted so many applications it reached the 10,000 limit in less than 48 hours.
“To spur entrepreneurship and economic growth, an increasing number of countries have introduced immigration policies that provide visas to skilled entrepreneurs,” according to a new study by Saerom Lee and Britta Glennon of the Wharton School at the University of Pennsylvania. “This paper investigates whether these policies influence the founding location choice of immigrant founders, by leveraging the introduction of Canada’s Start-up Visa Program in 2013. We demonstrate that this immigration policy increased the likelihood that U.S.-based immigrants have a start-up in Canada by 69%.”
The study used a unique dataset from Revelio Labs of 1.2 million U.S.-based individuals who “founded a company either in the U.S. or Canada between 2006 and 2021.”
The research concluded immigrants to the United States from Asian countries were the most likely to start a business in Canada. “Our study also finds that, compared to immigrants of other ethnic groups, Asian immigrants were more responsive to this policy change,” write Lee and Glennon. “Furthermore, our results suggest this responsiveness varies by the presence of Asian immigrants in their prior location. That is, the larger the Asian immigrant enclaves in the origin location, the less likely that U.S.-based Asian immigrants in this location move to Canada to start a business.
“Taken together, these findings not only imply that immigration policy has a significant impact on the founding location decisions, but also reinforce the idea that this decision entails a complex weighting of multiple location factors—most notably, social ties and embeddedness. Put differently, when choosing their founding location, immigrant would-be founders seem to weigh the presence of co-ethnic immigrant communities against immigration policy.”
Importance of Immigrant Startups
Recent studies show immigrant entrepreneurs are essential to the U.S. economy. According to research by the National Foundation for American Policy (NFAP), immigrants have started more than half (319 of 582, or 55%) of America’s startup companies valued at $1 billion or more. “Nearly two-thirds (64%) of U.S. billion-dollar companies (unicorns) were founded or cofounded by immigrants or the children of immigrants” the study concludes. “Almost 80% of America’s unicorn companies (privately-held, billion-dollar companies) have an immigrant founder or an immigrant in a key leadership role, such as CEO or vice president of engineering.”
Other research shows immigrants play a crucial role as entrepreneurs in artificial intelligence. “Immigrants have founded or cofounded nearly two-thirds (65% or 28 of 43) of the top AI companies in the United States, and 70% of full-time graduate students in fields related to artificial intelligence are international students,” according to an NFAP analysis. “Seventy-seven percent of the leading U.S.-based AI companies were founded or cofounded by immigrants or the children of immigrants. Forty-two percent (18 of 43) of the top U.S.-based AI companies had a founder who came to America as an international student.” (I authored the two studies.)
No Startup Visa In The United States
Unlike Canada, the United States does not have a startup visa. However, it’s not for a lack of trying. Business groups and venture capital firms have supported immigrant startup legislation for over a decade. The lack of a startup visa means foreign nationals typically do not found businesses in the United States until they become permanent residents (green card holders).
In 2022, the America COMPETES (CHIPS) Act that passed the House of Representatives included Rep. Zoe Lofgren’s (D-CA) LIKE Act, which would allow foreign-born entrepreneurs an opportunity to earn lawful permanent residence. The CHIPS Act also created an exemption from annual green card limits and backlogs for foreign nationals with a Ph.D. in STEM fields and those with a master’s degree “in a critical industry,” such as semiconductors.
During a House-Senate conference committee, Rep. Lofgren urged the Senate to accept the House’s immigration measures. The Biden administration, businesses and universities wanted to see the exemption for individuals with Ph.D.s in STEM fields and other provisions pass Congress.
Senator Charles Grassley (R-IA), with support from Senate Republican Leader Mitch McConnell, blocked the immigration measures from being part of the CHIPS Act that became law.
Based on an analysis of a similar bill, Rep. Lofgren’s LIKE Act could have created 1 million to 3.2 million jobs in the United States over a decade. The projections were based, in part, on research from the Ewing Marion Kauffman Foundation, which noted the estimates do not include job creation that may take place after the founders become permanent residents.
“Our paper suggests that if the U.S. were to adopt a startup visa program for immigrants, we would see a significant increase in entrepreneurship in the United States,” said Glennon in an interview.
At a Senate Budget Committee hearing on September 13, 2023, cochaired by Sen. Sheldon Whitehouse (D-RI) and Sen. Alex Padilla (D-CA), Britta Glennon explained how immigration leads to large gains in productivity, innovation and business and economic growth but that current restrictions lead to problems.
“Our restrictive immigration policies have already motivated companies to move jobs and investment out of the U.S.,” testified Glennon. “Businesses based in countries with more restrictive immigration laws are at a competitive disadvantage. They perform worse on average than firms in countries with more open immigration systems, both because they get less talent and because of the lost collaboration between U.S.-born and immigrant workers.”
“When we choose to not reform our outdated and restrictive immigration system, we put our companies at a competitive disadvantage relative to companies in other countries,” concluded Glennon. “Start-ups in particular are more likely to fail when they cannot hire immigrants. The U.S.’s outdated immigration laws hurt our competitiveness and economic dynamism, sending jobs, start-ups, investment and innovation to countries that do recognize the economic benefits that immigrants bring.”