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Viewpoint April 27, 2011, 8:20PM EST


Why Immigrant Entrepreneurs Are Leaving the U.S.

Skilled immigrants are returning to their native countries to start businesses. The author of a new study examines the motivations of Chinese and Indian returnees—and urges the U.S. to fix immigration policy to get them back
By Vivek Wadhwa

In a speech last week to Facebook employees, President Obama discussed the role immigrant entrepreneurs play in U.S. economic competitiveness. "We want more Andy Groves here in the United States," he told the crowd, touching on the Hungarian-born entrepreneur's startup success. "We don't want them starting Intel in China or starting it in France."

Sadly, our President didn't back his words with action. He simply said he would support "comprehensive immigration reform," which is legislation that has no chance of passing. This is because it tries to fix all the problems with immigration at the same time. Most Americans will support legislation to admit more doctors, scientists, and entrepreneurs, but they are deeply divided on the issue of amnesty for illegal immigrants. So we're in a messy stalemate.

Our leaders don't seem to understand the urgency of the situation. They fail to recognize how much the world has changed. Entrepreneurs see abundant opportunities in places like India and China now. The world's best and brightest can stay home and achieve as much success as they could in the U.S. Skilled workers who immigrated to the U.S. are optimistic about these opportunities; many are headed back home.

My team at Duke, UC-Berkeley, and Harvard researches the role that skilled immigrant entrepreneurs play in U.S.competitiveness. After we published our study on the reverse brain drain, many academics and policymakers told me entrepreneurs would be frustrated in their native countries and return to the U.S. They pointed to India's weak infrastructure, China's authoritarianism, and the corruption and red tape in both countries.

This prediction seemed wrong based on our observations during visits to India and China, so we launched a project to learn about the entrepreneurial landscape there. Over eight months, we surveyed 153 workers who had studied or worked in the U.S.and returned to India to start companies, and 111 who went back to China. We detail our findings in our new study, The Grass Is Indeed Greener in India and China for Returnee Entrepreneurs. It shows that the majority of returnee entrepreneurs are doing better at home than they believe they would do in the U.S.

Why did they return home? Because of burgeoning economies, access to local markets, and family ties. More than 60 percent of Indian and 90 percent of Chinese returnees said the economic opportunities in their countries were a major factor in their return. Seventy-eight percent of Chinese were lured by the local markets, as were 53 percent of Indians. And 76 percent of Indians and 51 percent of Chinese said family ties were strong factors.

Respondents took pride in contributing to their home country's economic development. More than 60 percent of Indians and 51 percent of Chinese rated it as very important. Government incentives weren't at all important for Indians, but were very important to 23 percent of Chinese. Only 10 percent of Indians and Chinese said they left the U.S. because they had to; others may have been frustrated with their visa situation but had other, more important reasons for returning home.

How does their situation in their native countries compare to the U.S.? Surprisingly, 72 percent of Indian and 81 percent of Chinese returnees said the opportunities to start their own businesses were better in their home countries. Speed of professional growth was also better back home for the majority of Indians (54 percent) and Chinese (68 percent). And the quality of life was better or at least equal to what they'd enjoyed in the U.S. for 56 percent of Indians and 59 percent of Chinese .

What are the advantages of doing business in India and China? More than 70 percent of Indians ranked operating costs and employee wages as very important advantages; over 60 percent of Chinese reported similarly. Seventy-six percent of Chinese ranked access to local markets as very important; 64 percent of Indians ranked it the same.

Optimism about the fast-growing economies also made a big difference. Indians and Chinese (55 percent and 53 percent, respectively) saw the mood in their countries as a very important advantage. And as you would expect, given the support the Chinese government provides businesses, far more Chinese (31 percent) consider government support very important than do Indians (7 percent).
There is a silver lining to this cloud.

Yes, returning entrepreneurs in India and China are exploiting their privileged position in the world economy, building businesses that take advantage of their access to the lower costs and expanding markets and business networks in their home countries. And yes, we would benefit if all this startup activity was in the U.S. But there is also a two-way circulation of ideas and opportunities happening. According to our study, a majority of the returnees exchange business information with their counterparts in the U.S. at least monthly; about one-third do it weekly or more frequently. The accumulation of linkages between entrepreneurs in Bangalore and Beijing and entrepreneurs in the U.S. offers opportunities for mutually beneficial growth.

Our policymakers urgently need to recognize that we are in a new era of competing and collaborating at the same time. While we can't stop the brain drain, we can level the playing field by fixing our immigration system. Let's start by increasing the number of permanent resident visas available for the 1 million engineers, scientists, doctors, and researchers and their families who are in the U.S. legally but trapped in immigration limbo. To speed its passage, let's decouple the Startup Visa legislation from the comprehensive immigration reform package. Then we can focus on recruiting entrepreneurs from all over the world to play on our turf, as President Obama urges.

Wadhwa is a visiting scholar at University of California-Berkeley, senior research associate at Harvard Law School, and director of research at the Center for Entrepreneurship and Research Commercialization at Duke University. Follow him on twitter—@vwadhwa