Below are a few excerpts from the resulting article (on Twitter), “One Quarter of Entrepreneurs in the United States Are Immigrants.”
The Value of the Longitudinal Employer Household Database (LEHD) “Advocates for immigration commonly say immigrants are responsible for a lot of great companies,” says William Kerr, the Dmitri V. D’Arbeloff — MBA Class of 1955 Professor of Business Administration at Harvard Business School. “After all, they argue, [Google founder] Sergey Brin was an immigrant—look at the power of job creation they bring.”
Outside of a few high-profile examples like Brin, there have been virtually no data to gauge the level at which immigrants create companies and jobs.
“Before this [LEHD database], the most prominent source of information we had was self-employment statistics,” says Kerr. Self-employment, however, can mean many things and is frequently not connected with job creation; independent contractors with no employees may call themselves self-employed, while the CEO of a rapidly growing startup might not.
Kerr and Pekkala Kerr (Wesley College) used a database of detailed employer-employee information developed by the US Census Bureau called the Longitudinal Employer Household Database (LEHD), which includes employment data from state-level quarterly payroll filings of 200 million Americans from the years 1992 to 2011. (Currently, the database includes records from 11 states, including immigration hotbeds California and Florida, from 1992 onward. Twenty-eight states are present from 2000 onward.)
“The scope of the database is enormous,” says Kerr. “You are literally talking about billions of records.”
Authors William Kerr (Harvard) and Pekkala Kerr (Wellesley College) calculated that approximately 24 percent of all entrepreneurs during their sample period were immigrants—an outsized proportion given that immigrants comprise only about 15 percent of the population. This contribution, however, was roughly in keeping with some of Kerr’s prior work on immigrant contributions to US patents.
In addition, Kerr and Pekkala Kerr were able to show for the first time that the immigrant percentage of entrepreneurship is growing over time, from 17 percent in 1995 to 28 percent in 2008 for a stable cohort of states present during the full period. The LEHD is being extended to 2012, and the authors will update the platform to extend further out.
Moreover, rather than stop with static measures of firm creation, the researchers tracked the fortunes of the firms that the immigrant entrepreneurs created. Examining statistics on growth and survival, they found that immigrant-founded companies were more likely to follow an “up or out” dynamic than those started by natives.
“They are more likely to fail than those founded by natives, but those that survive experience greater employment growth,” says Kerr. This “up or out” scaling dynamic is frequently connected to how entrepreneurs create jobs, and this finding suggests immigrants may play an accentuate role in that process. “The way entrepreneurs create jobs is not by staying small forever and creating a gazillion firms,” says Kerr. “It’s a small firm that grows to a Facebook or a chemical plant with 800 employees.”