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The Connection Between Immigration and Innovation

Foreign entrepreneurship plays a significant role in California's diverse and global trade-intensive economy, especially in high tech industries. California Tech Companies founded by immigrants include Yahoo!, Sun, Ebay, Google, Intel, Viewsonic, SanDisk, and Nvidia.[i] 34% of engineering and technology companies were founded by immigrants between 1995 and 2005, and that number jumps to 52% when limited to Silicon Valley startups.[ii] In 2005 these companies generated $52 billion in revenue and employed 450,000 according to the Kauffman Foundation.[iii]  Foreign entrepreneurship brings new dollars into California's economy, creates jobs, and promotes foreign trade. One channel of foreign entrepreneurship into the state is the student visa program, allowing foreign graduates in California Universities. California’s foreign student population is still recovering from 9/11 restrictions,[iv] although the estimated foreign student population jumped from around 78,000 in 2007 to around 86,000 in 2009.[v]

State and federal governments have encouraged foreign entrepreneurship by developing programs like the EB-5 program, through which 10,000 immigrant visas per year are available to qualified individuals seeking permanent resident status on the basis of their engagement in a new commercial enterprise. Permanent resident status based on EB-5 eligibility is available to investors who have invested, or are actively in the process of investing, at least $1,000,000 into a new commercial enterprise that they have established. Applicants must demonstrate that his/ her investment will benefit the U.S. economy and create full time employment for no fewer than ten qualified individuals, or maintain the number of existing employees in a "troubled business." The program is administered by U.S. Citizenship and Immigration Services and is subject to federal law and regulations, however the State of California plays an active role in the identification and designation of targeted employment areas, in which the investment required to obtain the visa, is decreased to $500,000. [vi]

Similar programs like the H-1B program can also be a source of new workers to the state. In the U.S. 54% of H-1B visa residents are from India, 9% from China, 3% from Canada, 31% South Korea, and other nationalities make up 31%.[vii] With 18.2%, California ranks highest in distribution of H-1B visas by work location, followed by New York with 11.7% and Texas with 8.3%.[viii]

Barriers to Success

While immigrants are an integral component driving innovation in California they face serious problems in establishing permanent residence and worry that the United States may be facing a “reverse brain-drain” in the near future. The Kaufman Foundation reported that in 2006, 500,040 individuals and an additional 555,044 families were waiting for visas in the primary employment-based visa categories.[ix] Over the same period, only 120,000 visas were available for skilled immigrants in key employment categories. This, coupled with the fact that no more than 7% of visas maybe allotted to immigrants from any single country (India is allocated the same amount of visas as Iceland, 8,400 means that immigrants from heavily populated countries may be waiting indefinitely for permanent resident visas.[x]

At the same time, China and India are both surging ahead as centers of research, and Kaufman Foundation research indicates that returnees from the United States are part of what is fueling this growth.[xi] New opportunities in their home countries are absorbing highly skilled workers that were trained in U.S. schools but could not obtain work visas. Since foreign workers are such an essential part of innovation in California it is critical that steps be taken to reform immigration policies and end the export of American-trained skilled worked to international competitors.

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