The bedrock of American commerce is rooted in businesses whose beginnings reach across continents. From technology, to retail both brick-and-mortar and online, to toothpaste, many of our country’s most recognizable brands were founded by foreign-born owners. We’re talking Google, eBay, Kohl’s, Yahoo!, Sara Lee, Colgate, Kraft, Proctor & Gamble, Huffington Post–all of these indispensable giants were all, you guessed it, founded by immigrants.
When it comes to the value of small businesses with foreign-born owners, the numbers speak for themselves. Before the recession and after, 30% of recent American small business growth is thanks to businesses whose owners weren’t born within our shores. This is no surprise considering that, according to the Fiscal Policy Institute, a higher percentage of immigrants (18%) start businesses than non-immigrants (13%). That 5% difference persists, even though areas with smaller foreign-born populations have the highest rates of immigrant-owned businesses.
Once a new citizen is settled in, his or her potential as a business owner begins to grow. The Fiscal Policy Institute’s study shows that entrepreneurs who have been in the United States for a decade or more are “considerably more likely” to start a small business. In fact, “Among immigrants who have been in the United States for 10 years or more, 4.4 percent own an incorporated business, compared to 3.3 percent for U.S.-born and 3.5 percent for immigrants who have been in the United States for less than 10 years.” The Small Business Administration adds that about one in every ten foreign-born employees is a business owner, and 620 of 100,000 immigrants start a business every month. Andrew Rainer of The Guardian writes that, in the midwest, “Even as entrepreneurial activity declined across the country during 2013, immigrants were almost twice as likely to start businesses as the US-born.” But why? What makes Americans born elsewhere more likely to pursue the American Dream?
According to the Harvard Business Review (HBR), this propensity for entrepreneurship has several possible sources. Two common explanations are the immigration selection process, which in many countries “favor[s] highly motivated and capable individuals,” and discrimination in the labor market, which, “exert[s] pressure on them to seek self-employment.” But HBR has a different theory. People who are born in one place and move to another have “cross-cultural experience”, which can’t be manufactured or learned by those who have lived in the same place all their lives. Foreign-born citizens are exposed to twice as many different kinds of consumers and have the capacity to make something that is commonplace in one country revolutionary in another (like Starbucks, modeled on Italian coffeehouses). HBR also claims that cross-cultural experiences encourage creativity when the individual has to learn to juggle diverse problems and cultures.
Whatever the cause, the conclusions are the same across the board: communities and neighborhoods benefit when newcomers dive into business. Urban social geographer, Dr. Paul McDaniel, Ph.D., reports that, “Increasingly, cities and regions looking to stem population decline and stimulate economic growth are seeking to attract immigrants and encourage immigrant entrepreneurship. Immigrants play an outsize role in establishing “main street” businesses (retail, accommodation and food services, and neighborhood services), which are important for generating neighborhood-level economic growth and revitalization.” A Main Street that is bustling with business is a sure sign of a healthy community.
That’s why, this week, we’re celebrating foreign-born small business owners. Even established small businesses with U.S.-born owners can benefit from HBR’s “cross-cultural experience” theory. They recommend that owners and managers travel with their entrepreneurial ears and eyes wide open, “systematically comparing what they observe in other markets.” Think of it as international thinking outside the box, except the box just got a lot bigger.