In a State of the Union address that may now seem like it was delivered years ago, President Obama addressed the nation’s need to “win the future” through encouraging America’s dominance in entrepreneurship and technological innovation. And yet, the country’s economic downturn and the American immigration system seem to be driving away many of the very innovators needed to accomplish this.
A recent report released by the Kauffman Foundation, a research and policy center focused on entrepreneurship, delves into some of the reasons that Chinese and Indian professionals who become educated in the U.S. are increasingly being drawn back to their home countries to start businesses there. The report, entitled “The Grass Is Indeed Greener in India and China for Returnee Entrepreneurs,” surveyed U.S.-educated professionals from both India and China on the reasons why they decided to make the return to their home countries to start up businesses there instead of in the U.S.
In the past, underdevelopment and a dearth of business opportunities for highly skilled workers provided the “push” factors that encouraged professionals to bring entrepreneurial ventures to the U.S. But the economic downturn, rising business opportunities elsewhere, and the difficulty of obtaining a U.S. visa are hampering these workers from setting up startups and business ventures in the U.S. Of more than 1,000 respondents surveyed in the Kauffman report, 60 percent of Indian respondents and 90 percent of Chinese respondents said that rising economic opportunities in their home countries was a very important factor in encouraging their return home. Lower costs of operations as well as access to local markets were other significant factors drawing these professionals back to their home countries.
“What was once a ‘brain drain’ that advantaged the U.S. economy now is reversed, to the long-term benefit of India and China,” the report states. But it also adds that the business and educational contacts that these professionals acquire during their time in the U.S. can also lead to more cross-continental collaboration with their U.S. counterparts, noting that “the accumulation of linkages between entrepreneurs in regions such as Bangalore and Beijing and entrepreneurs in the United States offers opportunities for mutually beneficial growth.”
Still, the “reverse brain drain” trend has been worrisome for many in the technical and professional sectors. Moreover, while economic opportunity was cited by survey respondents as the primary reason for their decisions to return to their home countries, America’s immigration policy has also long been touted as a major obstacle for foreign-born entrepreneurs trying to start up businesses in the U.S. The government’s H-1B visa program, aimed at providing temporary visas for “foreign workers in specialty occupations that require theoretical or technical expertise in specialized fields, such as scientists, engineers, or computer programmers,” are a way for U.S. businesses to sponsor foreign-born workers for three years, with an automatic three-year extension. However, recent years have seen a widening gap between the number of H-1B visa applications and those granted.
A 2009 study by William Kerr of Harvard Business School and William Lincoln of the University of Michigan showed a strong correlation between the number of H-1B visas granted and the rate of patent applications in the U.S. by immigrant inventors. The Kauffman Foundation has also issued several reports on the importance of immigrants to the U.S.’s entrepreneurial and startup scene. After years of lobbying and advocacy from the technological and business sectors, the federal government has begun to push for improvements in the immigration system to attract foreign-born entrepreneurs. Earlier this month, U.S. Citizenship and Immigration Services declared that it would expand eligibility for the employment-based second preference, or EB-2 visa, which includes “foreign workers with advanced degrees and individuals of exceptional ability in the arts, sciences, or business.” While eligibility for the EB-2 visa previously required an applicant to show proof of a job offer in the U.S., these new regulations waive that restriction if the applicant can show that his or her venture would be in the U.S. national interest.
Congress has also made moves to expand visas for high-skilled foreign-born professionals. In March, Senators John Kerry, Richard Lugar, and Mark Udall re-introduced the Startup Visa Act of 2011 to the Senate, a bill that would allow foreign-born entrepreneurs to receive a two-year visa upon showing that a U.S. investor is willing to invest at least $100,000 in the venture. The bill is an expansion of similar legislation that was introduced in 2010. “While I continue to believe that broader reform of our immigration system is long overdue, this fix is important to ensure we don’t unnecessarily hinder the innovators and entrepreneurs who will help drive America’s future economy and job creation,” wrote Senator Udall recently in a column for the Colorado Springs Gazette.
Obviously, given the U.S.’s gloomy economic outlook, expanding visas to foreign entrepreneurs may only prove to be one channel to encourage innovation; as the Kauffman report showed, rising economic opportunity in entrepreneurs’ home countries is perhaps a more significant factor in drawing talent away from the U.S. As Vivek Wadhwa, one of the authors of the Kauffman report, wrote in India Currents magazine last month, “The United States will not be the only land of opportunity and it will not be the only land of innovation. We can’t turn the clock back now and keep the entrepreneurs who have already left, but we can certainly try to increase our competitive odds by keeping those who are already here—and who want to be playing on our team, from leaving.”