Immigrants have long been recognized as a driving force in the entrepreneurial landscape, particularly in the United States. Statistics show that immigrants are 80 percent more likely to start businesses than native-born Americans, with more than half of America’s billion-dollar startup companies having immigrant founders. Despite these impressive numbers, there is limited research on the factors that influence immigrants’ decisions about where to locate their startup businesses.
In a recent study titled “The Effect of Immigration Policy on Founding Location Choice: Evidence from Canada’s Start-up Visa Program” by Saerom Lee and Britta Glennon, the impact of Canada’s Start-up Visa Program on US-based immigrant entrepreneurs’ migration decisions was investigated. Launched in 2013, the program aims to attract individuals who will establish innovative companies that create jobs and compete globally by offering permanent residency to eligible immigrants and their families.
Since the inception of Canada’s Start-up Visa Program, there has been a noticeable increase in the number of immigrants based in the United States relocating to Canada to start businesses. The study analyzed a sample of 1,190,798 college-educated non-Canadian entrepreneurs who lived in the US before founding a startup in either the US or Canada between 2006 and 2021. Immigrants accounted for 26.1 percent of this sample, significantly higher than their 14 percent share of the US population.
The research findings revealed that Canada’s Start-up Visa Program has had a positive impact on the likelihood of US-based immigrants starting a company in Canada. The program increased the likelihood by 0.048 percentage points, from a baseline of 0.069 percent, indicating a growing trend over the years. However, the response to the program varied among different immigrant groups.
Asian immigrants were more inclined to move to Canada and start a business there due to longer waits for US employment-based permanent residency and their significant representation in Canada’s designated organizations and population share. On the other hand, Hispanic entrepreneurs were less likely to start firms in Canada, possibly due to their higher representation in the US population and the existence of established ethnic enclaves that provide support for entrepreneurial endeavors.
Interestingly, startups founded in Canada by formerly US-based immigrants exhibited slightly lower survival rates compared to those founded by US or Canadian natives. After three years, the survival rate for firms launched by formerly US-based immigrants was around 73 percent, while native founders had an 85 percent survival rate. Possible factors contributing to this disparity include relocation costs, the liability of foreignness, and differences in the entrepreneurial ecosystems between Canada and the US.
In conclusion, the study sheds light on the significant role that immigration policies play in shaping the decisions of immigrant entrepreneurs regarding where to establish their businesses. By understanding these factors, policymakers and stakeholders can work towards creating more conducive environments for immigrant entrepreneurs to thrive and contribute to the economic growth and innovation of their adopted countries.
