Immigration as innovation

The modern world is replete with examples of how immigration from outside of a nation’s border has contributed to dramatic increases in the stock of human ingenuity within. Historically, the tolerance for diversity present in Northern Europe during the reformation is often equated as one of the factors that allowed the region to enjoy a head start economically, culturally and socially compared to their more single-minded Southern neighbours.

A tad more recently (1999), research by AnnaLee Saxenian of the University of California at Berkeley showed that foreign-born scientists and engineers were at the heart of a massive boom in jobs and wealth creation for the California economy. Her research found that Chinese and Indian engineers ran a significant share of Silicon Valley companies, founding 24 per cent of all tech companies in the region between 1980 and 1998.

Follow-up research by Vivek Wadhwa of the Labor & Worklife Program at Harvard Law School, found that between 1995 and 2005 the percentage of Silicon Valley startups founded by immigrants had increased to 52 per cent, and that over a quarter of U.S. science and technology companies were headed by a foreign-born chief executive or lead technologist. This despite the fact that they constitute only 12 per cent of the total American population.

Canada should subsequently benefit tremendously from its diverse population, believed to be the fifth most diverse in the world. In 2005, 18 per cent of Canadians were born outside of the country and it’s estimated that this figure will rise to 22 per cent by 2017.

But are we? The Royal Bank not too long ago found that the under-employment of foreign-born Canadians cost the country $13 billion a year. Moreover, in their study RBC found that the wave of foreign-born employees who entered Canada between 1991 and 1995 saw their incomes sit at 70% of the Canadian-born average after having spent 5 years in the country.

The economic downturn of 2008-2010 has hit this demographic even harder, with loss of employment among new foreign-born Canadians, defined as having been in Canada five years or less, dropping over three times as much as for those born in Canada (5.7% vs.1.6%).

Overall, the past two decades has seen average incomes for foreign-born Canadians has been on a significant downward trend, leaving new Canadians much less successful then their born-in-Canada neighbours. We’re evidently not getting the full benefit we could from our diverse population.

The reasons for these differentials are quite well researched and focus primarily on the failure of both government and corporations to properly recognize foreign credentials and work experience and thus facilitate the entry of skilled labour into appropriate functions in the workforce.

But is the foreign-born component of Silicon Valley, and the subsequent success of the region, driven by regulation and recognition? Perhaps in part. However I think an equally large causal factor in explaining California’s successful integration of foreign born expertise, is driven by the provision of the right mix of incentives for innovation and entrepreneurialism, a set of facilitating factors that don’t depend on where you’re from, but rather on what you do.

If so, the right questions to ask are where does Canada fit in terms of attracting innovators and entrepreneurs, and what do we do to help them succeed in their startups once they’re here.

We need to look at immigration and integration as a long-term project. One that focuses not only on getting skilled individuals into the country but rather at ensuring the successful exploitation of those skills and foreign experiences into new innovations, services and meaningful economic activities.

It’s easy to think that we’re in the drivers seat and that expertise and skilled labour from poorer countries will always flow to richer developed nations. Increasingly, however, skilled foreign-born Canadians and Americans are returning home, especially to China and India, where the demand for their skills, and the opportunities for success, are even greater than here.

With them goes a great deal of potential economic growth and employment, a loss that should force us to rethink our policies related to immigration, integration and the future of our innovation economy.

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One Comment on “Immigration as innovation”

  1. […] the opportunities they once sought overseas. Economics will dictate these decisions, but given the poor job Western countries have done in providing for economic opportunities for new immigrants, it wouldn’t surprise many […]


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