US innovation high---immigration

New research shows immigration and a diverse population propelled America’s rise as a superpower in innovation. The study examined surnames, counties and patents from the 1850s to the 1940s to reach its findings. The research, bolstered by other recent studies, shows increasing immigration likely enhances innovation, productivity growth and labor force growth—essential elements to raising economic growth and producing a higher standard of living in America.

Smith, Jones and Patel

Imagine two areas of the United States and predict which will produce the most innovations. In one county, nearly all the people are named Smith and Jones. They think alike and share the same lifetime experiences. In a second county, people have diverse backgrounds and experiences and have last names like Smith and Jones but also Patel, Nguyen, Jimenez, Adebayo and others. The research finds the more diverse county will produce the most innovations.

“The core idea is that many, if not most, innovations arise from the recombinations of existing ideas, approaches and techniques that come together through the connections among diverse minds,” according to a new study by Max Posch (University of Exeter), Jonathan Schulz (George Mason University) and Joseph Henrich (Harvard University).

“Leveraging quasi-random variation in counties’ surname compositions—stemming from the interplay between historical fluctuations in immigration and local factors that attract immigrants—we find that surname diversity increases both the quantity and quality of innovation,” according to the research. “The results support the view that social interactions between diverse minds are key drivers of innovation.”

Posch, Schulz and Henrich examined patents and surnames (from the full-count U.S. Census data) from 1850 to 1940. “To measure innovation, we rely on two patent indicators. First, we calculate the total number of patents per capita for each U.S. county for 5 or 10-year periods from the 1850s to the 1940s, based on the Comprehensive Universe of U.S. Patents (Berkes, 2018). Second, we use the breakthrough patent indicator created by Kelly et al. (2021) to capture highly important patents.”

A November 2021 study produced similar findings and concluded, “The large inflow of foreign migrants into the U.S. since 1965 may have contributed to an additional 8% growth in innovation and 5% growth in wages.”

“We show a causal impact of immigration on innovation and growth in U.S. counties. To identify the causal impact of immigration, we use 130 years of detailed data on migrations from foreign countries to U.S. counties,” write Konrad B. Burchardi (Stockholm University), Thomas Chaney (Sciences Po), Tarek Alexander Hassan (Boston University), Lisa Tarquinio (University of Western Ontario) and Stephen J. Terry (Boston University). “We show immigration has a positive causal impact on innovation, measured as patenting of local firms, and on economic growth, measured as real income growth for native workers.”

Recent research on billion-dollar startups shows the impact of immigrant entrepreneurs in the United States. “Immigrants have started more than half (319 of 582, or 55%) of America’s startup companies valued at $1 billion or more,” according to a National Foundation for American Policy (NFAP) analysis. (I authored the study.) Nearly two-thirds (64%) of U.S. billion-dollar companies (unicorns) were founded or cofounded by immigrants or the children of immigrants.

The more than 300 immigrant-founded U.S. companies are valued at $1.2 trillion, more than the value of all the companies listed on the main stock markets of many countries, including Argentina, Colombia, Peru, Russia, Mexico and others.

The study showed how immigrants often combine with U.S.-born individuals to produce innovation. The analysis found that 58% of immigrant-founded billion-dollar companies had solely an immigrant or multiple immigrant founders (i.e., no U.S.-born founders). However, the other 42% of billion-dollar startups with an immigrant founder had one or more U.S.-born founders.