Indian Entrepreneurial Success in the United States, Canada, and the United Kingdom Robert W. Fairlie, UC Santa Cruz Harry Krashinsky, University of Toronto Julie Zissimopolous, RAND Krishna B. Kumar, RAND Conference on Entrepreneurship and Growth November 19, 2009

Rate of Indian business ownership not substantially higher than national averages

Country of Birth Source: U.S. Census 2000, U.K. Census 2001, Canadian Census 2001

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But Indian immigrants are more successful entrepreneurs Net Annual Business Income of Immigrants in U.S. (‘000 $)

Country of Birth Source: U.S. Census 2000

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More so than those from richer countries • In the US, immigrants from Taiwan, Korea, Greece, Germany, and England have lower entrepreneurial earnings

• Data on Indian immigrants in Canada and UK are also suggestive of success – In Canada, Indian net business income less than national average ($28,580 v $30,296), but a higher percentage of Indian businesses hire employees (48.4% v 42.4%) – In the UK too a higher percentage of Indian businesses hire employees (53.6% v 37.1%) Indian Entreps-4 Nov-19

We explore the factors underlying this success • Research question: – Do observable characteristics (especially, education and industry) explain the success of Indian entrepreneurs in the US, UK, and Canada, or is there an “India-specific” effect at work? – Observe differences in education and industry, which make these a priori candidates to explore

• Question important because: – It sheds light on a large group of immigrants (1M in US, 1/2M in UK, 1/3M in Canada) not studied much in this context – Allows us to gauge the extent of entrepreneurial “brain drain” of India Indian Entreps-5 Nov-19

Observe differences in education… Percent of Immigrants with a College Degree

Country of Birth Source: U.S. Census 2000, U.K. Census 2001, Canadian Census 2001

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…and industrial concentration of Indian entrepreneurs US

Canada

UK

Sector

National

Indians

National

Indians

National

Indians

Agriculture & Mining

5.8%

1.0%

12.7%

3.0%

5.7%

0.0%

Construction

17.4%

1.8%

13.1%

4.5%

20.1%

7.8%

Wholesale & retail trade

13.4%

26.7%

15.9%

20.2%

16.1%

41.9%

Transportation

3.8%

5.5%

4.8%

20.4%

6.7%

10.8%

Education, health, social services

10.5%

22.9%

10.6%

12.2%

8.6%

11.5%

Source: U.S. Census 2000, U.K. Census 2001, Canadian Census 2001

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Summary of what we do and what we find • For US and Canada, regress log net business income on group dummy first and see how this changes when education, demographic variables, and industry controls included

• For Canada and the UK, do the same for employer status

• Perform Blinder-Oaxaca decomposition on inter-group differences in log income and employer status

• Broad conclusion: Most of the Indian entrepreneurial success explained by observable differences Indian Entreps-8 Nov-19

Outline for rest of the presentation • Data • Regression results

• Decomposition results • Discussion

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Data Sources Census Data – Birth country, immigration status, ethnicity – Business owner (self-employed), business income, has employees? – Sample: ages 25-64 working 15+ hours per week

Date

Sample

Immigrant Group

Business Income

Employer business

2000 US

PUMS 5%

Birth country

Yes

No

2001 UK

SARS 3%

Birth country, ethnicity

No

Yes

2001 Canada

PUMF 2%

Immigrant status, ethnicity

Yes

Yes

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Summary Statistics

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Earnings differential for Indian entrepreneurs drops when controls included US log net business income reg. Explanatory var. Indian immigrant

(1) 0.4843 (0.0262)

Canada log business income reg.

(2) 0.1314 (0.0246)

(1) 0.0583 (0.0526)

(2) -0.1855 (0.0518)

College graduate

0.6223 (0.0041)

0.5081 (0.0139)

Female

-0.7520 (0.0041)

-0.5185 (0.0130)

Ages 25-29

-0.2540 (0.0079)

-0.2057 (0.0265)

Ages 45-59

0.0023 (0.0040)

0.0056 (0.0123)

Ages 60-64

-0.1867 (0.0074)

-0.1574 (0.0271)

Married

0.1633 (0.0043)

0.1234 (0.0135)

Agriculture

-0.6274 (0.0083)

-0.4192 (0.0206)

Construction

-0.0545 (0.0052)

-0.0062 (0.0165)

Region controls

No

Yes

No

Yes

Mean of dep var

10.14

10.14

9.9990

9.9990

N

534,044

534,044

33,676

33,676

Left out categories: white natives, ages 30-44; additional controls for ethnic/racial groups Indian Entreps-12 Nov-19

Similar pattern for whether entrepreneur employs others Canada employer firm reg. Explanatory var. Indian immigrant

(1) 0.0510 (0.0250)

UK employer firm reg.

(2) -0.0020 (0.0250)

(1) 0.170 (0.011)

(2) 0.125 (0.011)

College graduate

0.0720 (0.0060)

0.018 (0.004)

Female

-0.1080 (0.0060)

-0.021 (0.004)

Ages 25-29

-0.0620 (0.0120)

-0.037 (0.007)

Ages 45-59

0.0010 (0.0060)

-0.011 (0.004)

Ages 60-64

-0.0430 (0.0110)

-0.052 (0.007)

Married

0.1210 (0.0060)

0.080 (0.004)

Agriculture

-0.1340 (0.0090)

-0.073 (0.007)

Construction

0.0180 (0.0090)

-0.111 (0.004)

Region controls

No

Yes

Mean of dep var

0.45

0.45

0.371

0.371

N

33,676

33,676

84,439

84,439

Left out categories: white natives, ages 30-44; additional controls for ethnic/racial groups Indian Entreps-13 Nov-19

Decompositions show higher education explains income differences; industry matters for employment

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Immigration policies explain some but not all of the education differences Figure 3 Immigration by Type of Admission for 1998-2000 28%

Family-sponsored preferences / Immediate Family

71.6% 46.2%

51% Employment-based preferences

11.2% 10.8%

% of Canadian immigrants

7% Employment creation (investors)

% of US immigrants

0.1%

% of UK immigrants

2.4%

13% Refugee/Asylee

7.4% 33.0%

1% Other/Diversity

9.8% 7.7%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Sources: Dudley and Harvey (2001), “Control of Immigration Statistics: United Kingdom 2000”; U.S. Department of Homeland Security (2007); Citizenship and Immigration Canada (2007)

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Discussion • Observable characteristics explain a large portion of the high performance of Indian entrepreneurs, especially in the US and Canada

• Issues that appear worth following up: – In addition to immigration policies, labor and credit markets, and institutions in general likely matter. How much? – Study transnational location decisions of entrepreneurs – Brain drain from India in an entrepreneurial context and how recent reforms have affected it Indian Entreps-16 Nov-19