PPIC Logo Independent, objective, nonpartisan research
Press Release · June 30, 1999

High-Skilled Immigrants Key Drivers Of Technology Boom

Chinese, Indian Entrepreneurs Behind Thousands of Silicon Valley Businesses

SAN FRANCISCO, California, June 30, 1999–Shedding new light on the national debate over high-skilled immigrants, a just-released study by the Public Policy Institute of California (PPIC) finds that immigrant entrepreneurs in Silicon Valley are starting record numbers of businesses and generating jobs and wealth for the California economy.

While there is widespread recognition of the significance of immigrant entrepreneurship in traditional industries such as small-scale retail and garment manufacturing, there has been only anecdotal evidence of this phenomenon in the newer, technology-based sectors of the economy until now. Using a customized Dun & Bradstreet database, UC Berkeley professor AnnaLee Saxenian found that, in 1998, Chinese and Indian engineers were running one-quarter of Silicon Valley’s high-technology businesses. In that year, their 2,775 companies collectively accounted for more than $16.8 billion in sales and over 58,000 jobs.

In addition, the study reveals that the pace of immigrant entrepreneurship is increasing significantly. Chinese and Indian CEOs were running 13 percent of Silicon Valley technology companies started between 1980 and 1984 and 29 percent of those started between 1995 and 1998. These trends have relevance beyond the region, Saxenian argues. As the center of technological innovation and the leading export region in California, the Silicon Valley experience serves as a model and a bellwether for trends in the rest of the state.

“This research underscores important changes in the relationship between immigration, trade, and economic development in the 1990s,” said Saxenian. “In the past, we have assumed that the primary economic contribution of immigrants is as a source of low-cost labor, even in the most technologically advanced sectors of the economy. Now, we are seeing dramatic evidence that foreign-born scientists and engineers are making significant and growing economic contributions to the state, both directly, as investors and employers, and indirectly, as facilitators of global trade and investment.”

Indeed, Saxenian found that the contributions of highly skilled immigrants in Silicon Valley are not limited to their direct role as engineers and entrepreneurs. They have also created numerous professional and associational activities that facilitate information exchange and access to capital, and they are building far-reaching professional and business ties to regions in Asia. These long-distance networks are accelerating the globalization of labor markets and enhancing opportunities for entrepreneurship, investment, and trade both in California and in newly emerging regions such as Taiwan and India.

Saxenian’s findings add an important new dimension to the ongoing debate over increasing the number of H1-B visas for highly skilled immigrants. Currently, the argument focuses on the extent to which foreign-born workers displace native workers. This research suggests, however, that the debate must be widened to reflect the new role of immigrant entrepreneurs as creators of jobs, wealth, and global economic linkages.

“Immigrants are contributing to the dynamism of the Silicon Valley economy in unique and important ways,” Saxenian argues. “Restricting the immigration of these skilled workers could have far-reaching consequences, affecting not only the supply of skilled workers but also the rate of entrepreneurship, the level of international development and trade, and the state’s economic growth.”

Saxenian is a professor of regional development in the Department of City and Regional Planning at the University of California, Berkeley, and is internationally recognized for her research on technology regions. Her latest study, Silicon Valley’s New Immigrant Entrepreneurs, was supported by PPIC through an Extramural Research Program contract.

The Public Policy Institute of California is an independent, nonprofit organization dedicated to nonpartisan research on economic, social, and political issues that affect the lives of Californians.