Are Immigrants More Innovative? Evidence From Entrepreneurs

ABSTRACT We evaluate the contributions of immigrant entrepreneurs to innovation in the United States using linked survey‐administrative data on 199,000 firms. We find that not only are immigrants more likely than natives to own businesses, but on average their firms display more innovative activities and outcomes. Immigrant‐owned firms are particularly more likely to create completely new products, improve previous products, use new processes, and engage in both basic and applied research and development, and their efforts are reflected in substantially higher levels of patents and labor productivity. Immigrant owners are less likely than natives to imitate others' products and to hire more employees. Examining potential explanations, including entrepreneurial characteristics, industry choice, access to finance, and diversity, we find that the immigrant innovation advantage is robust to controlling for detailed characteristics of firms and owners, it holds in both high‐tech and non‐high‐tech industries and, with the exception of labor productivity, is even stronger in diverse teams. The evidence from nearly all measures that immigrants tend to operate more innovative and productive firms, together with the higher share of business ownership by immigrants, implies large contributions of immigrant entrepreneurs to U.S. innovation and growth.