'Reverse Brain Drain' Could Have Dire Consequences for U.S. Economy

By Eileen Elliott

Oct 03 2012, 10:47 AM EDT

A stagnating immigrant population could have dire consequences for the U.S. economy. A new Kauffman Foundation study finds that "high-tech, immigrant-founded startups - a critical source of fuel for the U.S. economy - has stagnated and is on the verge of decline."

According to the report "America's New Immigrant Entrepreneurs: Then and Now," the number of companies founded by immigrants has dropped one percent, from 25.3 percent to 24.3 percent over a five year period from 2006 to 2012. Silicon Valley, the world's hotspot for tech start-ups, has been hit the hardest with a dramatic decline from 52.4 percent to 43.9 percent.

"For several years, anecdotal evidence has suggested that an unwelcoming immigration system and environment in the U.S. has created a 'reverse brain drain.' This report confirms it with data," said Dane Stangler, director of Research and Policy at the Kauffman Foundation, in an article on the Foundation's site. "To maintain a dynamic economy, the U.S. needs to embrace immigrant entrepreneurs."

Immigrants founded one-quarter of the country's start-ups and 24.3 percent of engineering and technology start-up companies have at least one immigrant founder, amNew York reported today in an article based on the report.

Over the last six years there were 107,819 new engineering and technology companies, the report found. Data was gathered from a random sample of 1,882.

Vivek Wadhwa, director of research at the Center for Entrepreneurship and Research Commercialization at the Pratt School of Engineering, Duke University and one of the researchers conducting the study, has written a book based on the report, "The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent."

Possible solutions proposed by Wadhwa include the creation of a startup visa for immigrant entrepreneurs and an expansion in the number of green cards for skilled foreign workers.

The nonprofit Kauffman Foundation is one of the largest foundations in the world devoted to promoting entrepreneurship.