Image: Pedestrians walk past the headquarters of the Bank of China in central Beijing
DAVID GRAY  /  Reuters
90 percent of Chinese returnees said the economic opportunities in their countries were a major factor in their return.
updated 5/3/2011 7:48:10 AM ET 2011-05-03T11:48:10

In a speech last week to Facebook employees, President Obama discussed the role immigrant entrepreneurs play in U.S. economic competitiveness. "We want more Andy Groves here in the United States," he told the crowd, touching on the Hungarian-born entrepreneur's startup success. "We don't want them starting Intel in China or starting it in France."

Sadly, our President didn't back his words with action. He simply said he would support "comprehensive immigration reform," which is legislation that has no chance of passing. This is because it tries to fix all the problems with immigration at the same time. Most Americans will support legislation to admit more doctors, scientists, and entrepreneurs, but they are deeply divided on the issue of amnesty for illegal immigrants. So we're in a messy stalemate.

Our leaders don't seem to understand the urgency of the situation. They fail to recognize how much the world has changed. Entrepreneurs see abundant opportunities in places like India and China now. The world's best and brightest can stay home and achieve as much success as they could in the U.S. Skilled workers who immigrated to the U.S. are optimistic about these opportunities; many are headed back home.

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My team at Duke, UC-Berkeley, and Harvard researches the role that skilled immigrant entrepreneurs play in U.S. competitiveness. After we published our study on the reverse brain drain, many academics and policymakers told me entrepreneurs would be frustrated in their native countries and return to the U.S. They pointed to India's weak infrastructure, China's authoritarianism, and the corruption and red tape in both countries.

This prediction seemed wrong based on our observations during visits to India and China, so we launched a project to learn about the entrepreneurial landscape there. Over eight months, we surveyed 153 workers who had studied or worked in the U.S. and returned to India to start companies, and 111 who went back to China. We detail our findings in our new study, . It shows that the majority of returnee entrepreneurs are doing better at home than they believe they would do in the U.S.

Why did they return home?
Because of burgeoning economies, access to local markets, and family ties. More than 60 percent of Indian and 90 percent of Chinese returnees said the economic opportunities in their countries were a major factor in their return. Seventy-eight percent of Chinese were lured by the local markets, as were 53 percent of Indians. And 76 percent of Indians and 51 percent of Chinese said family ties were strong factors.

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Respondents took pride in contributing to their home country's economic development. More than 60 percent of Indians and 51 percent of Chinese rated it as very important. Government incentives weren't at all important for Indians, but were very important to 23 percent of Chinese. Only 10 percent of Indians and Chinese said they left the U.S. because they had to; others may have been frustrated with their visa situation but had other, more important reasons for returning home.

How does their situation in their native countries compare to the U.S.?
Surprisingly, 72 percent of Indian and 81 percent of Chinese returnees said the opportunities to start their own businesses were better in their home countries. Speed of professional growth was also better back home for the majority of Indians (54 percent) and Chinese (68 percent). And the quality of life was better or at least equal to what they'd enjoyed in the U.S. for 56 percent of Indians and 59 percent of Chinese.

What are the advantages of doing business in India and China?
More than 70 percent of Indians ranked operating costs and employee wages as very important advantages; over 60 percent of Chinese reported similarly. Seventy-six percent of Chinese ranked access to local markets as very important; 64 percent of Indians ranked it the same.

Optimism about the fast-growing economies also made a big difference. Indians and Chinese (55 percent and 53 percent, respectively) saw the mood in their countries as a very important advantage. And as you would expect, given the support the Chinese government provides businesses, far more Chinese (31 percent) consider government support very important than do Indians (7 percent).

There is a silver lining to this cloud.

Yes, returning entrepreneurs in India and China are exploiting their privileged position in the world economy, building businesses that take advantage of their access to the lower costs and expanding markets and business networks in their home countries. And yes, we would benefit if all this startup activity was in the U.S. But there is also a two-way circulation of ideas and opportunities happening. According to our study, a majority of the returnees exchange business information with their counterparts in the U.S. at least monthly; about one-third do it weekly or more frequently. The accumulation of linkages between entrepreneurs in Bangalore and Beijing and entrepreneurs in the U.S. offers opportunities for mutually beneficial growth.

Businessweek: America's most-promising startups

Our policymakers urgently need to recognize that we are in a new era of competing and collaborating at the same time. While we can't stop the brain drain, we can level the playing field by fixing our immigration system. Let's start by increasing the number of permanent resident visas available for the 1 million engineers, scientists, doctors, and researchers and their families who are in the U.S. legally but trapped in immigration limbo. To speed its passage, let's decouple the Startup Visa legislation from the comprehensive immigration reform package. Then we can focus on recruiting entrepreneurs from all over the world to play on our turf, as President Obama urges.

Vivek Wadhwa is a visiting scholar at University of California-Berkeley, senior research associate at Harvard Law School, and director of research at the Center for Entrepreneurship and Research Commercialization at Duke University.

Copyright © 2012 Bloomberg L.P.All rights reserved.

Video: Immigration laws blocking economic potential?

  1. Closed captioning of: Immigration laws blocking economic potential?

    >>> all this week here, as you may know, we've been taking a close look at the challenges for the changing american economy in our series we're calling " america at the crossroads ." one of the big questions for the u.s. is how to take advantage of the large number of foreigners who come here, get educated in our great colleges and universities and want to stay here but can't. it's causing an expensive brain drain . tom brokaw back tonight with more on this. tom?

    >> we hear a lot about immigration issues that involve workers who come here from mexico seeking low paying jobs, but in the high tech world, there's another kind of immigration controversy. it involves the h-s-b visa. that's a permit allowing a limited number of highly trained foreigners to stay here for just a few years even if they're successful entrepreneurs creating jobs. critics -- and there are many -- say that restriction penalizes america and helps our economic competitors. look around the offices of stat deal, an online coupon business, and it's not hard to see all the signs of a thriving venture. a young staff full of drive and ambition, a toteboard on the wall attracting new customers, one about every second. but snap deal isn't in silicon valley . it's in new delhi.

    >> we link up with vendors in each one of the cities.

    >> reporter: this man and his partner launched snap deal in february 2010 . they're already the number one e-commerce retailer in india .

    >> it's a simple concept. every day there's one very attractive deal. people come to the website, buy the deal, then go use it at the merchant.

    >> reporter: the company has created 300 jobs and counting, but he sometimes wonders what if, what if the country where he got his education, at the university of pennsylvania , where he helped start a company while he was still in business school , had let him stay in the united states ?

    >> i put my chips in the american basket and said that, let me try my hand here.

    >> reporter: but his visa ran out. and so he took his skills back to india . the united states issues only 85,000 of the so-called h-1-b visas for highly skilled workers every year. these visas expire after six year. the san francisco bay area , the home of the silicon valley , stanford and berkeley, this has always been a magnet for the best and brightest from foreign lands, but now many are wondering why do u.s. immigration officials make it so hard for them to stay?

    >> our competitors.

    >> reporter: this professor has been warning of a reverse brain drain for years.

    >> there's a lot of very good human beings who are unemployed, who lost their jobs. it is easy for them to blame foreigners. la they don't understand is that people like me, when i came to this country, i came here to study. my first company created a thousand job, my second company created 2,000 jobs.

    >> reporter: his research found between 1995 and 2005 , 25% of the start-ups in silicon valley had at least one immigrant founder. and those start-ups created almost a half million jobs. u.s. immigration rules are big roadblocks for the enterprising foreigners.

    >> everybody has stores to share. just how painful the visa process has been to quickly engage with customers, make sure that everything's developing and you've got this huge distraction on the side worrying whether you'll get kicked out of the country.

    >> reporter: a gathering of young silicon valley entrepreneurs center on their frustration over visas. how many of you think that you'll end up back in your home countries rather than staying here because of a visa issue? show me your hands. a number of you will go back and take the jobs with. you and immigration officials often don't even understand the technology business.

    >> in our case, we got a beautiful letter from the immigration service asking to prove that we had enough warehouse space to store our software inventory. we don't even have boxes of software. it's all on the internet.

    >> why deal with all this old school invasion system, just go where we are wanted?

    >> reporter: he went where he felt welcome, close to family and a newly vibrant india .

    >> there is no either/or relationship between the american dream and the indian dream. they can both exist. it's just that the guys who are building the indian dream right now could have been part of the american dream , too.

    >> reporter: almost everyone agrees that we do need immigration and visa reform, but that is a hot button issue in congress because of the undocumented workers at the bottom of the pay scale. meanwhile, the u.s. state department is encouraging foreign entrepreneurs at its outposts around the world. and that young indian who went back home? he's now thinking of opening a branch of his company in this country.

    >> powerful story. heartbreaking at times. tomorrow brokaw, thanks. our series will continue tomorrow night.


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