Tuesday, March 27, 2012

Migration Is Entrepreneurship

Is your region seeking job creation? Josh Lerner offers a cautionary tale. Capturing that Silicon Valley entrepreneurial magic is hard for policy makers to do. Like plugging the brain drain, most initiatives fail. With that in mind, Edward Glaeser has some advice:

My own mantra is that the best way to encourage local entrepreneurship is to attract and train smart people and then get out of their way. In that vein, I continue to believe that the U.S. can best lay the foundation for long-term entrepreneurship by improving education, so that more Americans acquire the knowledge needed for technological innovation.

An even easier way to engender entrepreneurship is to import it from abroad. The Kauffman Foundation, which is “devoted to entrepreneurship,” notes that, “Immigrants found companies here at greater rates than native-born Americans do, and are disproportionately successful in starting successful high-tech firms.” Kauffman advocates the expansion of visas for foreign entrepreneurs and more green cards to enable foreign students who study science to work in the U.S.

I have a hypothesis to explain why immigrants are "disproportionately" entrepreneurial. The very act of migration is entrepreneurial. I model migration in terms of risk and knowledge. The less knowledge you have of a place, the greater the perceived risk of relocation. Typically, you go where you know. Most migration covers a short distance. Moving halfway around the world to another country is a risky proposition. Immigrants figure out how to make it work.

Domestic migrants also figure out how to make it work. That's why attracting talent is the smart thing to do. Retaining homegrown talent encourages risk aversion and parochial attitudes. The most entrepreneurial places are magnets for talent. The job creation feeds on itself and a region becomes more cosmopolitan, a community full of people from somewhere else.

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