Foreign Students & American Entrepreneurship

- I am Jovanni Perry. I am professor of Economics at University of California. Davis and I have studied in the last 20 years the economic effect of immigration on US labor market on Europe, and the productivity consequences of migration and the integration of migrants into the US and European society. By looking at data on startup firms on which we can see whether the founder was a foreigner or an American, you can first see that international students have a higher probability, higher rate of startup creation than Americans, three to four times more likely to create a startup within five year of graduation. This is not a surprise. We have a lot of evidence that foreign students are half of the startup creation in most of the country here in Silicon Valley. We know that a very large proportion of startup come from international students. What we don't know very much is whether their contribution to startup come at the expenses of fewer American creating startups. And we find that Americans are significantly more likely to create a startup, in fact, to give a number for every 10% increase in the share of foreign student in a master program, which correspond on average to 60 more master student from a foreign country. There is one startup firm created by that program extra, and that one extra startup is 50% of the time, one foreigner who creates it, and 50% of the time one American who creates it. So big effect directly and indirectly. Why are Americans more likely to create a startup after graduation? One very important channel is co-founding. Many Americans who otherwise would've not founded a company, are co-founders of a company with a foreigner. And the interesting thing is that they're not only co-founder of companies with foreign student that were their classmates. They are more likely, but they're also more likely to create a company with foreigners who were not their classmates. So these openness to ideas, collaboration, complementary skills with other foreign students or other foreign entrepreneur seems to increase significantly if they have been in a class with foreign student. The other channel that seems interesting is that to say it in simple world, the presence of foreign student seems to expand the range of ideas that American student will explore. And we see that the extra company created either in collaboration with foreigners or by foreigners, are in somewhat of a different space than the one that American create. They are farther from the average type of firm that American create, and closer to the type of firms that foreigners that are created abroad. And so I give some examples, which are kind of funny, but if you think about, so Chobani is the yogurt company. Chobani is the type of yogurt that doesn't exist in the us. It's a Turkish type of yogurt. And the co-founder is a Turkish person with an American founder. So this person who studied in the US introduced this idea, and then Chobani has become very big. Another idea which is not very American, is important in a company, is Zumba this exercise that you do, which is a mix of salsa, dancing, dancing and karate. And there is this Colombian guy who studied in the US who thought that salsa was a very interesting thing and an American who knew martial art and they put together. Now Zumba is one of the biggest franchise in exercise in the world. And so one other important concept of this co-founding is this idea that American and foreign student, once they co-found, they really are complimentary to each other. Each one brings skills and abilities that the other does not fully have. And so with the idea coming from the foreign student and more of the knowledge of the local landscape from the American student, this co-founded company have been quite successful in exploiting this complementarity of skills and ideas. So the main takeaway from this research is that immigrants, by working in master programs with Americans, increase the probability and the propensity of Americans to be entrepreneurs. So if one would say, what is the policy implication of this? Policy implication is how important student visa have been for US universities and for us innovation and creativity also in the startup market.