Immigration and Entrepreneurship in the United States

Pierre Azoulay
Benjamin F. Jones
J. Daniel Kim
Javier Miranda∗

March 16, 2021

Abstract
Immigrants can expand labor supply and compete for jobs with native-born workers. But immi-
grants may also start new firms, expanding labor demand. This paper uses U.S. administrative
data and other data sources to study the role of immigrants in entrepreneurship. We ask how
often immigrants start companies, how many jobs these firms create, and how firms founded
by native-born individuals compare. A simple model provides a measurement framework for
addressing the dual roles of immigrants as founders and workers. The findings suggest that
immigrants act more as “job creators” than “job takers” and play outsized roles in U.S. high-
growth entrepreneurship.

∗
Azoulay: Massachusetts Institute of Technology and NBER (email: [email protected]); Jones: Northwestern
University and NBER (email: [email protected]); Kim: The Wharton School, University of Pennsylva-
nia (email: [email protected]); Miranda: Halle Institute for Economic Research (email: javier.miranda@iwh-
halle.de). We thank Bill Kerr, David Robinson, Jonathan Vogel, Peter Klenow and four anonymous referees for helpful
comments. Any opinions and conclusions expressed herein are those of the author(s) and do not necessarily represent
the views of the U.S. Census Bureau or its staff. The Census Bureau has reviewed this data product for unauthorized
disclosure of confidential information and has approved the disclosure avoidance applied. Approval Numbers:
CBDRB-FY20-CED006-0004, CBDRB-FY20-CED006-0023, CBDRB-FY20-329, CBDRB-FY20-391, CBDRB-FY21-
ESMD006-006, CBDRB-FY21-ESMD006-008, CBDRB-FY21-CED006-0009, CBDRB-FY21-CED006-0011.
1 Introduction

Economic perspectives of immigration often emphasize its role in expanding labor supply (e.g.,
Isaac 1947, Borjas 1994, Dustmann et al. 2016). From this starting point, immigrants may primarily
appear to compete with native workers, leading to reduced employment or lower wages (e.g., Altonji
and Card 1991, Borjas 2003). Native-born workers and their representatives may then oppose
immigration on the grounds that immigrants “take jobs” (e.g., Reder 1963, Briggs 2001). However,
this perspective, while common in economic research and powerful in policy, does not appear to
be the whole story. For example, studies of immigration shocks—including the Mariel Boatlift and
others—often do not find negative effects on local wages (Card 1990, Hunt 1992, Friedberg 2001).
And studies of mass migration to the United States have found substantial and persistent gains in
per-capita income in regions that experience greater immigration (Tabellini 2020, Sequeira et al.
2020). The tension between a labor supply orientation and the broader empirical findings suggests
that additional economic forces are at work.

This paper works to fill in the picture through the lens of entrepreneurship. We consider how
immigrants not only expand labor supply (as workers) but also expand labor demand (as founders of
firms). Using administrative data for the U.S. economy, we study the extent to which immigrants
start new firms, and we study the employment in the firms they found. By looking in a more
comprehensive manner at the U.S. economy, the analysis helps balance the ledger in assessing
immigrants’ economic roles.

To provide a coherent analysis of supply and demand, we first present a simple general equilib-
rium model of the economy. This model, building on Lucas (1978), considers how individuals sort
into workers and founders. We extend the model to consider the role of immigration. Intuitively,
if immigrants start many firms but these are small firms, their effect on labor demand will still
be small, so that immigration mainly expands labor supply and on net reduces wages. However,
if immigrant-founded firms tend to be large firms, then immigration may substantially expand
labor demand, raising wages. The theory makes this explicit. The model also engages firm size
distributions, including Zipf’s Law, that can be brought to the data.

1
 The empirical work then builds from three data sets. First, we use administrative records to
study every firm founded in the U.S. between 2005 and 2010. Second, we use the U.S. Census’s
Survey of Business Owners to study a representative sample of all U.S. firms. Third, we examine
the Fortune 500, allowing us to focus on the very largest firms in the U.S. economy. In all cases,
we code founders as either U.S. born or immigrant based on their place of birth. Using any of
these data sets, we find similar results. First, reflecting existing research, immigrants start firms
at higher rates than native-born individuals do (e.g., Kerr and Kerr 2020). Second, immigrants
do not simply start small firms. Rather, they tend to start more firms at every size, compared to
U.S.-born individuals. This is the key finding of the paper. There is effectively a “right shift” in
entrepreneurship for immigrants, with immigrants playing relatively large roles as employers rather
than employees, compared to U.S.-born individuals.

Overall, the findings suggest that immigrants appear to “create jobs” (expand labor demand)
more than they “take jobs” (expand labor supply) in the U.S. economy. By studying immigrants as
both entrepreneurs and workers, one produces a fuller picture of the impact of immigration. The
new facts can help resolve existing puzzles where empirical evidence, including natural experiments
and longer-run historical analysis, often suggests more positive economic effects from immigration
than labor-supply oriented perspectives produce.

The paper proceeds as follows. Section 2 further motivates our study. Section 3 presents a
simple model, generating key intuitions and clarifying basic empirical constructs. Section 4 presents
the empirical results and our central findings. Section 5 considers interpretations and extensions,
including patenting behavior. Section 6 concludes.

2 The Immigrant Entrepreneur

While researchers often study immigrants as workers, a recent stream of scholarship emphasizes
the role of immigrants as inventors and entrepreneurs. For example, immigrants are disproportion-
ately likely to account for U.S. patents (e.g., Bernstein et al. 2019) and hold STEM degrees (Kerr
and Kerr 2020). Immigrants further appear to be highly entrepreneurial. Immigrants start firms at
higher rates than native-born individuals in several countries (Fairlie and Lofstrom 2015), including
the U.S. (Kerr and Kerr 2020). At the same time, such entrepreneurial tendencies may largely

2
reflect businesses with limited growth prospects, perhaps because immigrants are “pushed” into
entrepreneurial activity due to poor labor market opportunities (Light and Roach 1996, Constant
and Zimmerman 2006). On the other hand, evidence also points to the substantial presence of
immigrant founders in Silicon Valley (e.g., Saxenian 2002), and examples such as Alexander Graham
Bell and Sergei Brin suggest that immigrants have started firms that grow to employ large numbers
of people, with large effects on the economy.

Ultimately, the economic effects of immigration will depend not just on whether immigrants
start firms, but on how successful these firms tend to be. In this paper, we will provide sys-
tematic evidence on this question. Intuitively, examining the size distribution of businesses, and
comparing this for immigrant and native-born founders, can shed light on the impact of immigrant
entrepreneurship. We will examine the size distributions using administrative data and other data
sources. To provide intuition and make the measures precise, we first develop a simple conceptual
framework.

3 Model

Immigrants can expand both labor supply (as workers) and labor demand (as employers).
Immigrants, as earners of income, also create more demand for final goods. The following model
builds on Lucas (1978) to introduce such general equilibrium reasoning. We extend this classic
model to consider the role of immigrants and provide explicit constructs that can be examined
empirically.1

3.1 Assumptions

Let there be N people in the economy, where individuals can choose to either work in a firm
(“workers”) or start a firm (“founders”). Each person is endowed with 1 unit of labor. Each
person is also endowed with some level of entrepreneurial acumen. The entrepreneurial acumen for
individual i is ai ≥ 0, which is distributed f (a). The (endogenous) number of founders is E and
workers is L, where E + L = N .
1
See also Feyrer (2011) for analysis of demographics in the context of the Lucas (1978) model.

3
 Firms maximize profits. They produce with a decreasing-returns-to-scale technology, and
productivity depends on the entrepreneur’s skill. These features allow for positive profits and
a size distribution of firms in equilibrium. Specifically, a firm’s output is

yi = ai liβ (1)

where β ∈ (0, 1) and li is the labor employed. The profit maximization problem is

πi∗ = arg max [yi − wli ] (2)

li

where the final good price is taken as numéraire (there is one type of output).

Individuals choose their career to maximize income. They can work for a wage, w, or start a
firm and earn profit πi∗ . Individuals choose to become entrepreneurs if πi∗ ≥ w and choose to be
workers otherwise. Utility is strictly increasing in consumption of the final good. Individual-level
consumption is thus equated to individual-level income, and total consumption is equated to GDP.

Finally, we consider two sub-populations, indexed j ∈ {0, 1}, to represent the native-born and
immigrants, respectively. The total population is partitioned as N = N0 + N1 and we similarly
partition L = L0 + L1 and E = E0 + E1 . The distribution of entrepreneurial acumen for each
group is f0 (a) and f1 (a). The overall distribution of acumen in the economy is the summation of
these two sub-population distributions, each weighted by its population share. Results below will
(eventually) specialize to consider Pareto-like distributions,
( γ
γj aj j /aγj +1 if aj ≤ a < amax
fj (a) = (3)
(aj /amax )γj if a = amax

where the parameters aj > 0 and γj > 0 are the Pareto scale and shape parameters and the support
is capped at some (very large) amax to guarantee finite moments.

3.2 Equilibrium Results

We emphasize two sets of results, helping frame the empirical work to follow. The first set
provides more general statements about equilibrium outcomes in light of immigration. The second
set considers Pareto-like distributions of entrepreneurial talent, which provide a close match to the
data.

4
 To solve for the equilibrium allocation, we have firm-level profit maximization and the individual
career decision. These are the choices in the economy. We close the model through the resource
constraints, which are the total available population and, most importantly, the distributions of
entrepreneurial acumen for the native-born and for immigrants.

First, from profit maximization, profits are strictly increasing in the individual acumen, ai .2
The entrepreneurship decision then implies a threshold value a∗ , where individuals choose en-
trepreneurship if ai ≥ a∗ and choose to be workers otherwise. This threshold level of acumen
is
 1−β
∗ w β
a = (4)
β 1−β
for any distribution of talent, f (a). This equilibrium condition provides a monotonically increasing
relationship a∗ (w). This produces an upward sloping labor supply relationship; namely, a higher
wage means that more people choose to be workers.3

Second, the share of entrepreneurs in the population is

∞
E∗
Z
= f (ai ) dai (5)
N a∗

which is decreasing in a∗ . Fewer founders means less labor demand, other things equal, leading to
a second, decreasing relationship between a∗ and w. The above two conditions together can thus
pin down the equilibrium wage and entry threshold decisions.

Aggregates follow by adding up the firm-level variables. Total output per capita is
∞
Y∗
Z
= yi∗ f (ai ) dai . (6)
N a∗

We can similarly add up firm-level labor demands, li∗ , and profits, πi∗ to produce aggregate labor,
L∗ , and aggregate profit, Π∗ . Equating total income to GDP, it follows, for any f (a), that the
labor share of total income is wL/Y = β and the profit share is Π/Y = 1 − β.
  1 1
β
1−β
Profit maximization, (2), provides firm-specific labor demands li∗ = βa
2
w
i
, outputs yi∗ = ai1−β w
β 1−β
, and
1
β
∗ 1−β β 1−β
profits πi = ai (1 − β) w .
3
Rather than a choice between work and leisure, here we mean the choice between being a worker (L) and a
founder (E). The phrases “labor supply” and “labor demand” in this construct refer to workers.

5
3.2.1 Immigration and Equilibrium

The influence of immigration can by understood by analyzing how immigration shifts the overall
distribution f (a). Consider three informative cases and the following proposition.

1. Immigration causes no shift in the distribution f (ai ).

2. Immigration creates a left shift in the distribution f (ai ) such that f (ai ) decreases for all
ai ≥ a∗ .

3. Immigration creates a right shift in the distribution f (ai ) such that f (ai ) increases for all
ai ≥ a∗ .

Proposition 1. The threshold for entrepreneurial entry, a∗ , is unchanged in case 1, decreasing in

case 2, and increasing in case 3. The equilibrium wage (w∗ ), GDP per capita (Y ∗ /N ), and total
profits per capita (Π∗ /N ) move in the same direction as a∗ .

Proof. See appendix.

These results are intuitive. In the first case, immigrants are just like the native born. They split
into workers and entrepreneurs just like the native born do, and immigrants have no net effect on
the equilibrium between labor supply and demand. Immigrants increase the scale of the economy,
by increasing total population, but they don’t change wages or other outcomes per person.

In the second case, immigrants tend to have less entrepreneurial acumen. Compared to the
native born, a relatively high share of immigrants become workers (pushing out labor supply)
rather than entrepreneurs (pushing out labor demand), and equilibrium wages fall. This case
corresponds to often-expressed fears that immigration worsens wages for native workers.

In the third case, immigrants tend to have more entrepreneurial acumen than the native born.
Although many immigrants become workers, a relatively high share now become business founders,
so that the labor demand effect outweighs the labor supply effect, causing the wages of native-born
workers to rise. GDP per capita and profits per capita also rise.

6
 One can further aggregate the total employment created by firms from a given population of
founders, leading to the following additional result.

Corollary 1. The total number of jobs created by immigrants is the same as the number of
immigrants in the population in case 1, less than the number of immigrants in case 2, and greater
than the number of immigrants in case 3.

Proof. See appendix.

This corollary is another way of seeing the labor market implications of immigration. The
net job creation effect (quantity), like the net wage effect (price), is increasing in immigration if
immigrants have an advantageous distribution of entrepreneurial acumen.

Note that while case 3 increases wages and per-capita income, it is not a Pareto improvement
without a transfer. Although workers are better off, and total profits go up, an individual native-
born entrepreneur sees his/her profit fall. This follows because, given that entrepreneur’s ai , the
firm’s profits decline when the wage increases. That said, from an inequality point of view, the
individuals who see less income in this case are those who are relatively well off.

In the data, we will examine entrepreneurial entry rates and the firm size distributions when
looking separately at the native-born and immigrant populations. Specifically, we count the number
of founders per member of a given population, e∗j = Ej∗ /Nj , providing an entrepreneurial entry rate.
To examine the distribution of firm size for each population, we count the number of firms of a
given employment size, cj (li∗ ) normalized by the size of that group’s population, Nj , and plot this
by firm size.

One can develop further results using these measures by specializing to Pareto-like distributions.
Consider the businesses founded by a given population j.

Corollary 2. For the distribution (3) and a < amax , the slope sj of the log normalized firm count
cj (li∗ )/Nj in the log firm size li∗ is
sj = −1 − γj (1 − β) (7)

Proof. See appendix.

7
 The firm size distribution thus follows a constant slope in logs—Zipf’s Law (Axtell 2001). The
Pareto distribution may thus be useful in matching power laws in the data. Further, anticipating
the empirics, we find that immigrants start firms at substantially higher rates than native-born
individuals but that the slopes of the firm size distributions are similar (if not exactly the same)
for both populations, suggesting an approximately common Pareto shape parameter (γ). Defining
each group’s population share as nj = Nj /N , we can then consider further, explicit equilibrium
results.

Corollary 3. For the distribution in (3) with common slope parameter γ, the relative entrepreneurial
entry rates are
γ
e∗1

a1
= . (8)
e∗0 a0
The equilibrium wage and per-capita income, with large amax , vary with the immigrant population
share as
d log x∗ aγ − aγ0
=θ γ 1 (9)
dn1 a0 n0 + aγ1 n1
for x∗ ∈ {w∗ , Y ∗ /N } and where θ = 1/γ if γ (1 − β) ≥ 1 and θ = 1 − β if γ (1 − β) < 1.

Proof. See appendix.

As with the general case in Proposition 1, equilibrium wages are increasing in immigration
if the immigrant distribution of entrepreneurial acumen is right-shifted compared to the native
population. For the Pareto approach in Corollary 3, a right shift in the acumen distribution for
immigrants follows from a1 > a0 . This will be seen as a parallel right shift in the firm size frequency
per group member—i.e., more entrepreneurial entry by immigrants across the firm size distribution.

4 Empirical Evidence

This section presents empirical evidence, comparing native-born and immigrant founded firms.
We describe the primary data sets, the specific empirical measures, and the key findings.

8
4.1 Data

We use three independent data sets. Our primary analysis uses administrative data to study
all new firms in the United States from 2005-2010 (“administrative data”). Our second analysis
studies the U.S. Census Bureau’s 2012 Survey of Business Owners, a representative sample of U.S.
businesses and their owners (“representative sample”). Our third analysis studies the Fortune 500
to consider the country’s largest firms and their founders (“Fortune 500”). We describe these data
sets here, with additional detail in the appendix.

4.1.1 Administrative Data

This data set links the U.S. Census Bureau’s Longitudinal Business Database (LBD), population-
wide W-2 tax records, and the U.S. Census demographic files (Numident). Business-level informa-
tion comes from the LBD, which tracks U.S. businesses and their establishments over time. The
LBD includes all non-farm private-sector firms in the U.S. with at least one employee. Our focus
in the LBD is on startups, to examine entrepreneurship by native and immigrant populations.

To study founders, we integrate employment and demographic records. We use a “founding

team” definition, identifying the top three earners (via W-2 records) in each new venture in its
founding year (Kerr and Kerr 2017; Azoulay et al. 2020). We then classify each founding team
member as either U.S.-born or immigrant, based on the country of birth (via Census Numident).
Using W-2 records and Census Numident, we similarly classify all workers in the economy as U.S.-
born or immigrant. We also consider alternative measures of the immigrant population.

To examine employment outcomes, we study the firm size distributions for U.S.-born and
immigrant founded firms five years after founding. Given data set availability, our main analysis
considers all 1.02 million firms founded from 2005-2010 that survive for five years. A benefit of the
administrative data is that it covers all new employer firms in the economy. The limitation is that
we see employment outcomes only in the early years of the business. This motivates our second
data set, which is a representative sample of U.S. business owners.

9
4.1.2 Survey of Business Owners

The Survey of Business Owners (SBO) collects information about businesses and their owners
from a representative sample of U.S. firms. The survey includes employer and non-employer
businesses, and we focus on employer businesses. The SBO is collected every 5 years. For our
exercise we use the 2012 SBO.

When looking at business owners, the SBO collects detailed information for the top four owners,
including their ownership shares, founder status, whether they are native or immigrant, and whether
they play an active role in managing the firm. We limit our analysis to businesses with at least
one founder amongst the top four owners. Our analysis is strictly limited to the founders (i.e., we
exclude investor-owners who did not found the firm).4 Our analysis sample includes over 200,000
employer firms.

For firm-level employment, we use the survey-collected data. Noting that sample coverage is
relatively thin at very large firm sizes, and yet a very small number of firms are extremely large
and responsible for substantial employment, we therefore turn additionally to a third data set, the
Fortune 500, to explicitly examine this upper tail.

4.1.3 Fortune 500

We further collect data on firms in the 2017 Fortune 500 ranking. For each firm, we capture,
whenever possible, the founding year, founder names, and founders’ country of birth. This process is
straightforward for many firms, particularly those founded in the recent past. It is more challenging
when firms are the offspring of many merged entities. Our approach is to trace the “genealogical
tree” for each firm to the earliest parent possible and then identify the founders of these parents
as the founders of the firm. Among the Fortune 500, we were able to determine the country of
birth for the founders for 449 firms. The founding years range from 1743 to 2004. Further details
regarding the data collection are provided in the appendix.
4
In examining firms where a current owner was also a founder, we are limited to studying firms where a founder
has survived. Thus this sample will emphasize firms founded in recent decades as opposed to very old firms.

10
4.2 Measures

We define individuals as immigrants if they are born outside the U.S.. For each data set,
we count the number of entrepreneurs from each population. We similarly examine the firms’
employment distribution, counting firms of a given size from founders in each population and
normalizing these counts by the size of each population. These measures produce the rate of
entrepreneurship (Ej∗ /Nj ) and the fraction of individuals who start firms of a given size (cj (li∗ ) /Nj ).

Firms can have multiple founders, and these founders may mix U.S.-born and immigrant
individuals. Allocating firms as either native-founded or immigrant-founded can then be done
multiple ways. We consider three different approaches to assigning firms to each sub-population.
The first approach, denoted Definition 1, counts the business as an “immigrant firm” if anyone in
the founding team is an immigrant. This method is most generous in counting immigrant firms.
The second approach, denoted Definition 2, counts the business as an “immigrant firm” only if
the “lead” individual is an immigrant. This approach is more conservative. We operationalize the
“lead” individual as the highest-paid on the founding team (administrative data) or the owner-
worker with the highest ownership share (SBO data).5 The final approach, denoted Definition 3,
uses proportional assignment. It collects all firms in a given employment size range and pools the
founding teams among this group of firms. It then allocates these firms proportionally (within the
given size range) as native-founded versus immigrant-founded, based on the share of founding team
members from each population. These three definitions produce alternative frequency distributions,
cj (l), and founder counts Ej for each population, acting as robustness checks.

To produce appropriate population normalizations, Nj , for each group, we also have reasonable
alternatives. We can consider all individuals who work (e.g., from all W-2 records) in each
group, or we can consider broader estimates to account for informal employment and unauthorized
immigration. Broader population measures also account for historical immigration levels, which is
especially relevant for the Fortune 500 data. In practice, the results appear robust to any plausible
estimate of the immigrant population (see Appendix A).
5
This second approach is not feasible for the Fortune 500 data.

11
4.3 Results

The central results are presented in Figures 1, 2, and 3. Each figure shows the normalized firm
size distributions (cj (li∗ ) /Nj ) for immigrant-founded and native-founded firms. The broad finding
is clear, looking across each data set and across different ways of defining immigrant and non-
immigrant firms. Namely, immigrant entrepreneurship presents a “right shift,” where immigrants
tend to start more firms per person of every size. Specifically, at each firm size, the frequency of
immigrant-founded firms per immigrant in the population tends to be larger than the frequency of
native-founded firms per native-born person in the population.

4.3.1 Administrative Data

Figure 1A presents the administrative data, counting immigrant firms as those with at least one
immigrant founder (Definition 1). We see here a parallel right shift for immigrant-founded firms.
The rate of entrepreneurship looking at the 2005-2010 period shows that 0.83% of immigrants in the
workforce start a firm, compared to 0.46% of native-born individuals in the workforce.6 Immigrants
thus exhibit a 80% higher entrance rate into entrepreneurship. Moreover, immigrants do not just
start many small firms; rather, they start more firms of every size.7

Figure 1B considers the administrative data again, but now counts immigrant firms only as those
where the highest-paid founding team member is an immigrant (Definition 2). The immigrant firms
defined this way are now a strict subset of those pictured in Figure 1A. While the power law for the
immigrant-founded firms necessarily moves left compared to Figure 1A, we still see that, at every
firm size, immigrant-founded firms outpace the native-founded firms. Now the slope is slightly
steeper for immigrant-founded firms, so that they dominate relatively more among small firms, and
only slightly among the largest firms.

Figure 1C considers a proportional assignment of immigrant and native-founded firms (Defi-

nition 3). The result looks very similar to Definition 2. A small difference is that now, in the
very largest size bucket, immigrant-founded firms are slightly outpaced by native-founded firms.
Nonetheless, aggregating across firms, the job creation rate is much greater among immigrants.
6
Although this is census data, a sampling error perspective would indicate enormously significant differences in
these entry rates, with standard errors of 0.0019% (immigrants) and 0.0006% (natives).
7
Immigrants also start firms quite quickly after entry to the United States—see Appendix B.

12
Specifically, the total employment assigned to immigrant-founded firms per immigrant in the
workforce is 49% larger than the total employment of native-founded firms per native worker in
the workforce.

4.3.2 Survey of Business Owners

Figure 2 repeats the analyses of Figure 1, but now using the Survey of Business Owners (SBO).
As we consider a much longer history of founding years, for which do not have W-2 records, here we
normalize the firm counts by historical immigrant and native-born population counts, weighting by
the founding years of the enterprises.8 Figure 2A shows the normalized firm size distributions using
Definition 1. As before, we see a right shift in the distribution for immigrant-founded firms, with
immigrants starting disproportionately more firms across the size distribution.9 The estimated rate
of entrepreneurship based on the 2012 set of businesses is 80% higher for immigrants compared to
native-born individuals. Thus, despite measurement differences from the previous section, we find
that immigrants exhibit the same 80% higher entrance rate into entrepreneurship when compared
to native-born individuals.

Figure 2B considers the SBO data again, now counting immigrant firms as only those whose
largest owner-share founder is an immigrant (Definition 2). Once again we see a right-shift of the
firm size distribution for immigrant-founded firms but now with a tilt where the size distributions
converge as we increase in size. This result is again similar to the pattern observed in the
administrative data.10 Figure 2C considers a proportional assignment of immigrant and native-
founded firms (Definition 3). The right-shift of the log size distribution for immigrant founded
firms remains. The results are broadly similar as when using the prior definitions.
8
Population information is sourced from the Migration Policy Institute tabulation of the 2010-2017 American
Community Surveys and 1970, 1990, and 2000 Census data, and Gibson and Lennon (1999) for further historical
data. These population data explicitly include unauthorized immigrants and the findings appear robust to any
reasonable assumption on the size of the unmeasured immigrant population (see Appendix A).
9
To comply with disclosure avoidance rules, we suppress data for firms above 10,000 employees as well as specific
cells in Figure 2.
10
The SBO definition, which is based on the largest current ownership share among the founders, might select
against immigrant founders to the extent that native-born founders are initially more affluent and can invest more.

13
4.3.3 Fortune 500

Figure 3 considers Fortune 500 firms. This analysis provides a close look at the very largest
firms in the economy and further allows for some historical comparison. Because the data is more
sparse (449 firms with founder information, 96 of which have at least one immigrant founder), we
create only three employment bins (using the 2017 employee count for each firm): Firms with less
than 30,000 employees, firms with between 30,000 and 100,000 employees, and firms with more
than 100,000 employees.11

The results are depicted in Figures 3A and 3B (corresponding to founder counts according to
the first and third definitions, respectively). The patterns observed are broadly consistent with
those obtained earlier: a right shift for immigrant-founded firms. As shown in the appendix,
similar results appear when looking at Fortune 500 firms founded since 1970, further revealing the
contemporary relevance of the right shift when looking among upper tail firms. Overall, the Fortune
500 findings indicate that the results extend to the very largest U.S. businesses and to founding
behavior over a broader sweep of U.S. business history.

4.4 Jobs and Wages

Following Proposition 1 and Corollary 1, a right shift in the entrepreneurial acumen distribution
for immigrants creates a net labor demand effect, where immigrants on net raise workers’ wages and
are net job creators. Calculating jobs created per member of the population in the administrative
data (Figure 1), we find that this ratio is at minimum 49% higher for immigrants than for the
native-born, consistent with the visible right shift in the figures and Corollary 1.12

Corollary 3 allows a more specific calibration of the wage gains. For example, take the 80%
higher rate of entrepreneurship (as found in the administrative data or SBO data using Definition 1).
With a labor share of income of β = 2/3 and the observed shallow slope of the firm size distribution,
11
We normalize the founder counts using group population estimates in the decade during which the firm was
founded, following the same procedure as with the SBO. See appendix.
12
The 49% rate is for Definition 3. Immigrant job creation is 59% higher using Definition 2 and over 100% higher
using Definition 1.

14
one can then calculate an approximate 0.24% increase in the economy’s wages and per-capita income
for a one percentage point increase in the immigrant population share.13

5 Discussion

In this section, we first summarize the results and relate them to the theory. We then consider
further interpretations of the findings and related evidence.

5.1 Summary

Overall, immigrants appear highly entrepreneurial. We see a power law in the distribution of
firm size for each population, but immigrant entrepreneurship appears right-shifted. Specifically,
there tend to be more immigrant-founded firms, per immigrant in the population, at each employ-
ment size. This is true recently, looking at all new firms in the economy using administrative data.
It is also true for firms founded in earlier time periods, including when studying the Survey of
Business Owners and the Fortune 500.

Relating to the theory, the higher rate of entrepreneurship, right shift in the firm size distribu-
tion, and higher count of jobs created per population member are all consistent with immigrants
presenting an advantageous distribution of entrepreneurial acumen, compared to native-born in-
dividuals. According to Proposition 1, this feature is consistent with increased wages and rising
income per capita.

5.2 Wages

The conceptual framework has emphasized heterogeneity in entrepreneurial acumen and result-
ing outcomes in the firm size distribution, with one type of worker (receiving a common wage).
More generally, one can look beyond the firm size distribution to consider the wages these firms pay.
Specifically, one might wonder whether immigrant-founders, although they create a large number
of jobs, perhaps do not create high-paying jobs.
13
The appendix provides the slopes of all firm size distributions plotted in Figures 1-3 (Table B2) and further
calibration information.

15
 The appendix and Table B1 use W-2 tax records to estimate worker-level wage regressions,
comparing the wages paid in immigrant-founded versus native-founded firms in the administrative
data. In a bivariate regression, workers in immigrant-founded firms receive 4.1% higher wages on
average. Controlling for founding year and county, however, the wages become virtually identical
for workers in immigrant and native founded firms. Additionally controlling for sector as well as
worker characteristics, including age, gender, and immigrant status, the wage differences continue
to shift somewhat and can flip sign. With all the controls we find that the wages are similar, with
a slightly higher wage (0.7%) in immigrant-founded firms. Overall, these findings suggest that
immigrant founders not only are substantial job creators but also do not appear to create lower
paying jobs.

5.3 Technology Businesses

Immigrants are disproportionately likely to hold STEM degrees (Kerr and Kerr 2020) and play
notable roles in major entrepreneurial ecosystems like Silicon Valley (Saxenian 2002). To study
the technological and inventive orientation of immigrant versus non-immigrant startups, we further
consider patenting behavior. This analysis links the corpus of U.S. patents to each firm in the
administrative data, studying all firms founded over the 2005-2010 period. Figure 4 presents the
results. Overall, firms with an immigrant founder are 35% more likely to have a patent than firms
with no immigrant founders. Studying firms by size group, those founded by immigrants are more
likely to have patents at all sizes and especially at larger sizes.14

To the extent that inventive firms bring productivity gains beyond the bounds of the firm,
entrepreneurship can play additional welfare roles. Large literatures find substantial spillovers and
high social returns from innovation investments (e.g., Hall et al. 2010, Bloom et al. 2013, Jones
and Summers 2020) and emphasize that technology advances play critical roles in driving rising
standards of living (e.g., Mokyr 1990, Cutler et al. 2006). Conceptually, the model in Section 3
emphasized a general equilibrium allocation without innovative spillovers. Adding productivity
14
These results are largely consistent with Brown et al. (2020) who find higher rates of innovation among immigrant-
founded startups in the American Survey of Entrepreneurs.

16
spillovers from inventive firms leads to the intuitive result that immigrant entrepreneurship can
further enhance productivity, wages, and per-capita income in the economy as additional benefits.15

5.4 Immigration and Selection

Overall, the picture is a rightward shift in the firm size distribution.16 Amidst a potentially rich
set of underlying mechanisms, the findings are broadly consistent with immigrants being positively
selected on entrepreneurial acumen. Various forces may explain this. For example, low ability
individuals may face difficulties migrating, and many U.S. visa classes select on high ability (e.g.,
Chiswick 1999; see also McKenzie et al. 2010, Hendricks and Schoellman 2018). More broadly,
the act of migration itself may suggest an entrepreneurial orientation; for example, the historical
literature in the United States emphasizes a “frontier” spirit, associated with adventurous migrants
and “a practical, inventive turn of mind” (Turner 1921), and some contemporary literature has
found that migrants are less risk averse (Jaeger et al. 2010).

To investigate the breadth of an entrepreneurial orientation among immigrants, we further

considered immigrant outcomes comparing those born in OECD countries with those born in non-
OECD countries, representing source countries with very different per-capita income levels and
other characteristics. We find that the normalized firm size distributions for these sub-groups are
nearly identical, and both are substantially right-shifted compared to firms founded by the native
U.S. born (see Figure B3). These findings further suggest a broad right-shift in entrepreneurial
acumen among immigrants, consistent with positive selection orientations.

6 Conclusion

This paper has studied the relative roles of immigrant and native-born individuals in new venture
formation in the United States. Using administrative data, the Survey of Business Owners, and
Fortune 500 data, we present new findings on the size of firms these different founder populations
create. Across all three data sets, we find that immigrants present a “right shift” in new venture
15
Separately, investigating why immigrant entrepreneurs have technology orientations and growth success is an
important area for continuing work, and can draw on demographic, educational, and network factors, among others
(e.g., Kerr and Lincoln 2010, Peri et al. 2015, Liang et al. 2018, Azoulay et al. 2020).
16
We also see a preponderance of immigrant-founded small businesses in some analyses. This is consistent with
“push” mechanisms into entrepreneurship (e.g., Light and Roach 1996) among other forces. Unpacking distinct and
perhaps differential mechanisms across the firm size distribution are important areas for further work.

17
formation, where immigrants tend to start more firms of each size per member of their population.
A simple theoretical framework provides intuition for thinking about these roles and helps make
the measures precise.

Overall, the entrepreneurial lens suggests that immigrants appear to play a stronger role in
expanding labor demand relative to labor supply, compared to the native-born population. These
findings can help resolve the tension between labor supply oriented analyses (e.g., Isaac 1947,
Borjas 1994, Dustmann et al. 2016), where immigrants are seen to compete with local workers
and depress wages, and natural experiments that often show more positive economic results of
immigration for native-born workers (e.g., Card 1990, Hunt 1992, Friedberg 2001). At the same
time, immigrants can play broader economic roles than examined in this paper, and additional
theoretical and empirical approaches can frame further dimensions. For example, immigration
can have fiscal implications (e.g., Storesletten 2000), implications for the emigrant countries (e.g.,
Giuliano and Ruiz-Arranz 2009, Docquier and Rapoport 2012), and political economy implications
(e.g., Tabellini 2020). Implications for inequality are also germane. In the theory developed here,
immigration can not only raise workers’ wages but also lower income differences between a worker
and a given business owner. Embracing these dimensions in further research can help develop an
increasingly full picture of migration and its effects.

18
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 Figure 1
Immigrant and Native-Born Entrepreneurship:
Firm Size Distributions using Administrative Data

Panel A: Definition 1 Panel B: Definition 2

Panel C: Definition 3

Notes: Each panel considers the firm size distribution, distinguishing between immigrant-founded and native-founded
firms, for all U.S. firms in the US Census Longitudinal Business Database founded in the 2005-2010 period. Based on
W-2 earnings data, founding team members are defined as individuals who are among the top three earners and join
the firm in the first year of operations. The x-axis is the log of firm size measured as total employment in the firm five
years after founding. The y-axis is the log count of firms of a given size, with the count normalized by the number of
workers from the relevant population (immigrant or native born). The plotted measures correspond to Corollary 2.
Panel A counts a firm as immigrant-founded if any of the founding team members are immigrants (Definition 1 in the
text). Panel B counts a firm as immigrant-founded only if the highest paid member of the founding team is an immigrant
(Definition 2). Panel C assigns firms to immigrant and non-immigrant proportionally based on the mix of immigrant and
native-born individuals in the founding teams (Definition 3).

22
 Figure 2
Immigrant and Native-Born Entrepreneurship:
Firm Size Distributions using Survey of Business Owners

Panel A: Definition 1 Panel B: Definition 2

Panel C: Definition 3

Notes: Each panel considers the firm size distribution, distinguishing between immigrant-founded and native-founded
firms, using the 2012 Survey of Business Owners. The x-axis is the log of firm size measured as current total employment
in the firm. The y-axis is the log count of firms of a given size, with the count normalized by the population size of the
relevant group (immigrant or native born). The population measure is an average of the immigrant or native-born
population size in the year of founding, weighted by the number of firms founded in that year. The plotted measures
correspond to Corollary 2. Panel A counts a firm as immigrant-founded if any of the owner-founders are immigrants
(Definition 1 in the text). Panel B counts a firm as immigrant-founded only if the owner-founder with the highest current
ownership share is an immigrant (Definition 2). Panel C assigns firms to immigrant and non-immigrant founded
proportionally based on the mix of immigrant and native-born individuals among the owner-founders (Definition 3).

23
 Figure 3
Immigrant and Native-Born Entrepreneurship:
Firm Size Distributions using the Fortune 500

Panel A: Definition 1 Panel B: Definition 3

Notes: Each panel considers the firm size distribution, distinguishing between immigrant-founded and native-founded
firms. The x-axis is the log of firm size measured as current total employment in the firm, using the 2017 Fortune 500.
The y-axis is the log count of firms of a given size, with the count normalized by the population size for the relevant
group (immigrant or native-born). The population measure is an average of the immigrant or native-born population in
the decade of founding, weighted by the number of firms founded in that decade. The plotted measures correspond to
Corollary 2. Panel A counts a firm as immigrant-founded if any of the founders are immigrants (Definition 1 in the text).
Panel B assigns firms to immigrant and non-immigrant proportionally based on the mix of immigrant and native-born
founders of the initial business (Definition 3). Definition 2 is not available for the Fortune 500, as discussed in text.

24
 Figure 4
Technology-Based Immigrant and Native-Born Entrepreneurship

Notes: Using W-2 and LBD data combined with patenting records from the USPTO, this figure shows the share of
firms in each firm size bin that own at least one patent, distinguishing between native-founded versus immigrant-founded
startups, for all firms in the US between 2005 and 2010. Immigrant-founded startups are identified using Definition 1,
which equals 1 if at least one of the founders are foreign-born. Firms are grouped into six bins according to the number
of employees five years after founding.

25