Immigrant Entrepreneurship: The Effect of Early Career Immigration Constraints and Job-Education Match on Science and Engineering Workforce

Abstract

We develop a theoretically grounded framework to explain the stylized fact that immigrants launch a disproportionate number of startups in high technology industries. We examine how immigration-related institutional constraints in the US shape early career choices of immigrants, with subsequent influences on the probability of transitioning into entrepreneurship, while accounting for (un-)observed differences in preferences and human capital between natives and immigrants. These constraints limit early career entrepreneurship and deflect individuals into jobs closely matched to their education in their initial organizational affiliation. While extant theory and empirical work indicates “job-education match” is negatively related to transitions into entrepreneurship, our framework suggests constraints imposed by the immigration system, coupled with key differences among immigrants and natives, may reverse this relationship. We utilize the National Science Foundation’s Scientists and Engineers Statistical Data System (SESTAT) to examine the careers of science and engineering graduates from U.S. universities. Our results indicate immigrant work constraints result in organizational affiliations that help develop focused human capital in early career stages. When coupled with (un)observable differences of immigrants relative to natives that manifest in lower opportunity costs (of forgoing paid-employment), job-education match results in higher likelihood to transition to entrepreneurship when work constraints are released — an effect entirely driven by their founding of incorporated firms with larger employment size at entry. We discuss our study’s contributions to theory, practice, and policy.