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Five Surprising Facts to Know about Immigrants and Entrepreneurship

Article by Matthew Denhart June 23, 2015 //   5 minute read

The creation of new businesses is essential for economic growth. New firms bring new ideas to the marketplace and compete with existing firms. When this happens, consumers benefit through more choices, higher-quality goods and services, and often lower prices. Entrepreneurship is therefore a crucial factor that pushes an economy forward.

What’s less well-understood by many is the important role immigrants play as entrepreneurs. Here are five facts you may not have known about immigrants and entrepreneurship.

*First, immigrants start new businesses at almost twice the rate of native-born Americans. The Kauffman Foundation’s “Index of Entrepreneurial Activity” shows that 430 out of every 100,000 immigrants in the U.S. became a new business owner on average each month in 2013, compared to only 250 per every 100,000 native-born Americans.

What’s more, the Kauffman Index reports that approximately 476,000 new businesses came into existence on average each month in the U.S. If native-born Americans started new businesses at the same rate as immigrants, this figure would be over 730,000 new firms per month. That kind of boost would do much to improve overall U.S. economic growth.

*Second, immigrants have shown themselves especially good at starting small businesses. The foreign-born account for 18% of all small business owners in America, even though they represent just 13% of America’s overall population.

In many regions, immigrants are even more important to the small business sector. According to one study, in New York City alone, some 90% of laundry businesses and 90% of taxi/ limousine services are owned by immigrants. Taken collectively in 2007, of U.S. small businesses in which at least half the founders were immigrants, these firms employed almost five million workers and generated more than $775 billion in revenue.

*Third, immigrants are helping lead the way in America’s most promising new industries. Vivek Wadhwa and a team of researchers found that almost 45% of major engineering and technology companies started in Silicon Valley between 2006 and 2012, and almost one-quarter of such firms founded nationwide, had at least one immigrant as a key founder. In 2012, immigrant-founded major engineering and technology firms generated more than $63 billion in sales and employed some 560,000 workers.

*Fourth, immigrant-owned U.S. businesses help expand America’s international trade. The 2007 Survey of Businesses found that immigrant-owned businesses were much more likely to be exporters, and when comparing just businesses that do export, immigrant-owned businesses tend to export to a greater extent.

In fact, exports totaled at least 50% of total annual sales at 2.2% of immigrant-owned U.S. businesses, but the same was true at only 0.8% of businesses owned by native-born Americans. Immigrants may have an innate advantage when it comes to exporting. After all, to break into an overseas market, a business must offer products that people in those markets want to buy. A successful exporter must also understand the language, culture, and business practices of a foreign market. Immigrants bring with them unique knowledge of all these things, helping their own businesses succeed and helping the U.S. economy build stronger international ties.

*Fifth, immigrants are responsible for many of the world’s most important companies. Every year Fortune Magazine identifies America’s biggest companies. Analyzing the 2010 Fortune 500 list, the Partnership for a New American Economy finds that 41% of all Fortune 500 companies had at least one key founder who was an immigrant or the child of an immigrant. These firms are recognizable to any American household, some of which include:  Verizon, Pfizer, Kraft, DuPont, Google, Yahoo!, and eBay.

From small street vendors to corporate boardrooms, immigrants continue to make their impact felt on America’s business community and wider economy. That’s something policymakers and voters alike should keep in mind as the debate heats up on immigration reform.

Matthew Denhart is the author of “America’s Advantage: A Handbook on Immigration and Economic Growth,” published by the Bush Institute and the U.S. Hispanic Chamber of Commerce.