September 21, 2017

Startup visa – good policy or bad? It’s good.

I’ve had a couple of questions today about a visit from Chris Alexander, the minister of citizenship and immigration, and his announcement of an improved visa process for foreign entrepreneurs. See story here.

One individual queried why we’d support foreigners and not just our own entrepreneurs. Now I have an evident political bias against the current governing party but I won’t let cloud my policy lens. The answer is that the startup visa, or other programs like it, are good policy, and help create the grounds for significant domestic employment growth.

There’s a wealth of research that highlights the immense contributions made by immigrants to technology or other research and development intensive sectors. The best work I’ve seen was done by Vivek Wadhwa and Annalee Saxenian (and others).[1]

They looked at a sample of 11,000 venture-backed companies in the United States over the period 1990 to 2005. The authors found that 25% of them had at least one immigrant as a key founder of the company. And the impacts of these immigrant-founded companies on the broader American economy is immense, contributing over $52 billion in 2005 sales and creating nearly 450,000 jobs. A subsequent National Foundation for American Policy analysis of the top 50 venture-capital-backed companies in 2011 shows that nearly half of those 50 firms were founded or co-founded by immigrants.

Here in Canada I’ve yet to see similarly rich data, however Industry Canada has a series of papers that looks at the contributions of new Canadians. They find a higher propensity towards entrepreneurship than the Canadian average, and a significantly higher rate of investment into R&D amongst those immigrant-founder and majority-owned businesses. Moreover, immigrant-founded businesses are nearly twice as likely to export their product than other Canadian firms.[2]

Given the link between exporting and investment in technology or research as a driver for high-growth, promoting these firms is very good policy.  Finding a way to bring the best and brightest to Canada to start their entrepreneurial ventures is similarly good policy. These programs bring innovative ideas and jobs to Canadians, new and old. If someone tells you otherwise, ask for some data to back it up.



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