Foreigners Boost Technology: But North Carolina Has Fewer Immigrants to Start Technology Companies
By David Ranii, The News & Observer, Raleigh, N.C.
Jan. 4–North Carolina and Research Triangle Park lag the nation in the rate of technology companies started by foreign-born entrepreneurs, according to a new study.
That means the state and region are missing some of the benefits of a major economic force.
A study being released today by Duke University’s Pratt School of Engineering and the University of California at Berkeley’s School of Information concludes that immigrants have been major contributors to the U.S. economy over the past decade. From 1995 to 2005, they started technology companies that employ hundreds of thousands and generate tens of billions of dollars in annual sales.
The study estimates that one-fourth of the nearly 29,000 engineering and technology companies started in the United States during that span had at least one foreign-born key founder.
Nationwide, 26 percent of all immigrant-founded technology companies have founders born in India. That’s more than any other country and more than the total of the next four countries — the United Kingdom, China, Taiwan and Japan — combined.
“Immigrants are leading in creating businesses and in innovation,” said Vivek Wadhwa, executive in residence at the Pratt School and co-author of the study.
But immigrants in North Carolina and RTP were less involved in tech startups, accounting for 14 percent and 19 percent, respectively. North Carolina has a significantly smaller percentage of its population who are foreign born. The study also cites the state’s traditional focus on manufacturing and agriculture and scarce venture capital.
The study’s national data lend new perspective to the immigration debate, which has focused on the wave of unskilled immigrants crossing U.S. borders illegally.
The other side of the coin, Wadhwa said, is the highly skilled immigrants who come here and help make the U.S. economy more competitive. One of the nation’s key advantages is its ability to “attract the world’s best and brightest and assimilate them,” he said.
The study estimates that companies founded by immigrants from 1995 to 2005 posted $52 billion in revenue and employed 450,000 workers in 2005.
Wadhwa hopes that the study will convince policymakers to do more to attract skilled immigrants.
Wadhwa said that anecdotal evidence has convinced him that immigrant entrepreneurs in the Triangle are gaining momentum. He is a native of India and the founder of Relativity Technologies, a Raleigh software company.
Among the immigrants who have formed Triangle companies is Vipin Garg, a native of northern India. He is the founding CEO of Tranzyme Pharma in RTP.
Tranzyme, which is developing drugs to treat gastrointestinal and metabolic diseases, has raised $50 million in venture capital and has 38 employees. The six-year-old company has no products but in its infancy generated as much as $3 million in annual revenue by doing drug research work for others.
Garg, 49, is a biochemist who moved to the United States when he was 25 to do postdoctoral work at Drexel University in Philadelphia. He stayed because he wanted to work for a small biotech company where he could contribute ideas, an opportunity that wasn’t available in India then.
Garg thinks that being from India has worked to his advantage. Indians, he said, have a rep- utation for spending money wisely.
Garg added that he lives up to that reputation: “My board always says, ‘With Vipin, we know we aren’t wasting any of our money.’ “
The study found that U.S. immigrants are overachievers who produce companies out of proportion to their numbers. Although they are involved in 25 percent of tech startups, just 11.9 percent of the U.S. population was foreign born in 2004, census data show.
But North Carolina immigrants are overachievers, too — there just aren’t as many of them. The Census Bureau estimates that in 2005, 6.7 percent of the state’s population was foreign born.
The outsized contributions of immigrants isn’t because foreign countries produce smarter people, Wadhwa said. Rather, U.S. policies limit the influx of immigrants to the cream of the crop.
In addition, immigrants might come to America with a different perspective that makes them more willing to take the risk of starting a company, said Ben Rissing, research scholar at the Pratt School and co-author of the study.
The study was based on a survey of 2,054 engineering and technology companies formed between 1995 and 2005 with more than $1 million in sales. The survey, which has a margin of sampling error of plus or minus 1.8 percentage points, was conducted by students at the Pratt School.
To count as a company founded by an immigrant, at least one of two primary founders — the president-CEO or the top technology executive — had to be foreign born.
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Copyright (c) 2007, The News & Observer, Raleigh, N.C.
Distributed by McClatchy-Tribune Business News.
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