Peer Reviewed. Title: Immigrant Entrepreneurs in Silicon Valley. Journal Issue: Berkeley Planning Journal, 12(1)

Peer Reviewed Title: Immigrant Entrepreneurs in Silicon Valley Journal Issue: Berkeley Planning Journal, 12(1) Author: Saxenian, AnnaLee Edulbehram, J...
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Peer Reviewed Title: Immigrant Entrepreneurs in Silicon Valley Journal Issue: Berkeley Planning Journal, 12(1) Author: Saxenian, AnnaLee Edulbehram, Jumbi Publication Date: 1998 Permalink: http://escholarship.org/uc/item/0262j5q6 Local Identifier: ucb_crp_bpj_13042 Abstract: This anicle documents the growing presence of highly educated and technically skilled Indian and Chinese immigrants in the Silicon Valle y workforce. These immigrants are employed in the high-tech sectors of the economy at greater rates than the general population, are more likely to work in manufacturing than services, and have a greater degree of professional employment than the norm. Census and corporate data suggest that Indian- and Chinese-run businesses are already a substan tial force in the Silicon Valley economy comprising almost one-quaner of high -tech firms. Finally this anicle provides examples of local networks that suppon en trepreneurial dynamism among these immigrant groups and explores the implications of this research for economic development policy. Copyright Information: All rights reserved unless otherwise indicated. Contact the author or original publisher for any necessary permissions. eScholarship is not the copyright owner for deposited works. Learn more at http://www.escholarship.org/help_copyright.html#reuse

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I M M IGRANT ENTREPRENEURS IN SILICON VALLEY

Annalee Saxenian and J u mbi Edulbehram This anicle documents the gro wing presence of highly educated and technically skilled Indian and Chinese immigrants in the Silicon Valley workforce. These immigrants are emplo yed in the high-tech sectors of the economy at greater rates than the general population, are more likely to work in manufacturing than services, and have a greater degree of professional employment than the norm. Census and corporate data suggest that Indian- and Chinese-run businesses are already a substan tial force in the Silicon Valley economy comprising almost one-quaner of high-tech firms. Finally this anicle pro vides examples of local networks that suppon entrepreneurial dynamism among these immigran t groups and explores the implications of this research for economic development policy.

After graduating from the University of California at Berkeley, Alex Au worked for more than a decade in a series of Silicon Valley technology companies . By 1 983, he felt that he had reached a glass ceiling and started the Vitelic Semiconductor Corporation in his garage . Au initially drew on connections in his native Hong Kong to raise capital and later to develop the Asian market for the firm's products . When Vitelic merged with Taiwan based Mosel in 1 99 1 , the combined business had over $1 50 million in sales and hundreds of employees in San Jose, Taiwan, and Hong Kong . Prabhu Goel sold Gateway Design Automation, the firm he had started on a shoestring budget in 1 982, to another Silicon Valley software company in 1 99 1 for $80 million and decided to become a venture capitalist. Today Goel divides his time between Silicon Valley and his native India, investing in the projects of promising Indian entrepreneurs in California through a group called The Indus Entrepreneur, while also funding and advising start-ups in places like Bangalore and Bombay .

Berkeley Planning Joumal

1 2 ( 1 998) : 3 2-49

Immigrant Entrepreneurs,

Saxe n i a n and Edulbehram

Silicon Valley i s widely known for its most revolutionary product, the i ntegrated circuit, or IC. However the saying i n the local technology commu nity that MSilicon Valley i s run by I C s " refers n o t to semiconductors, but to Indians a n d Chinese. I m m i g rants m a ke u p a growing share of the professional a n d technical workforce i n S i l i c o n Valley, and many of t h e s e s k i l led i m m igra nts are becoming a ctive entrepreneurs. C hinese and I n d i a n engi neers, i n particular, have started some of the reg i o n ' s most successful technology companies, including Sun M icrosystem s , Cirrus Log i c , Vitelic, Gateway Desi g n , Solectron and Network Peripherals, as well as h u ndreds of less well­ known firms that m a ke u p the reg i o n ' s dense i n d u strial i nfrastructure . This highly skilled i m m igrant workforce is one of Silicon Valley's least understood assets . And its significance !'! as i ncreased u nexpectedly i n the past decade as C h i nese and I n d i a n engi neers, l i k e Au and Goe l , have returned to their home cou ntries or exploited their ties to Asia by building careers that allow them to operate simu ltaneously on both sides of the Pacifi c . These newly mobile i m m igrants are building powerful social and busi ness networks that offer access to sources of capita l , i nformatio n , skills, and contacts - both local and d i stant - that support entrepreneurial success and the integration of Silicon Valley i nto fast g rowing Asi a n markets. There is a large scholarly literature on ethnic entrepre neurs that documents the growing presence of i m m igrant businesses i n ind ustrial societies and theorizes about non-market mechanisms, o r Methnic strateg ies", ranging from ethnic social ties to rotating credit associations, that allow i m m i g ra nts to mobilize the resources needed to build su ccessful businesses (Waldinger and Bozorg mehr 1 996; Waldinger, et al. 1 9 90; Light and Bonacich 1 988) . However, this literature locates i m m ig rants al most exclusively i n busi nesses that a re m a rg i nal to the mainstream economy such as smal l-scale resta urants, reta i l , and sweatshop m a n ufacturi n g . Moreover, it documents the tendency to create l a rgely self-co ntained i m m i g rant niches, o r Methnic enclaves" (Portes 1 9 9 5 ) t h a t h a v e m i n i m a l ties to the outside economy. Even scholars who focus on global capital and l a bor flows (Sassen 1 988) see i m m igrant social networks reprod ucing third-world conditions i n advanced economies, rather than contri buting to opportu nities for entrepreneurship among more highly skilled groups. 33

Berkeley Planning Journal

I n contrast, Silicon Valley's new i m m igrant entrepreneurs a re highly skilled engi neers who are active in the most technologically sophisticated sectors of the economy. Moreover, while they benefit from supportive ethnic networks that offer access to local sources of skill, capital, technology, and i nformation, they are also creating comparable busi ness ties to fast-g rowing reg ions in Asi a . These •transnational entrepreneurs" provide an important but largely unrecognized source of com petitive advantage by l i n king dynamic reg ions i n an increasi ngly g l o b a l economy. This article reports on the results of the first phase of a longer term research project on the new immigrant entrepreneurs in Silicon Valley . ' It documents the growing presence of highly educated and technically skilled immigrants (largely Asian-born) in the Silicon Valley workforce in recent decades, and presents data that suggest that Indian and Chinese-ru n busi nesses are already a substantial force i n the Silicon Valley economy. Finally, it provides examples of local networks that support this e ntrepreneurial dynamism among these i m m igrant groups. Future work will document the way that these immigra nts are becoming transnational entrepreneurs by extending their social and professional networks to distant reg ions such as Taipei and Bangalore.

Data and Methodology

This research draws on two different types of data . First, we analyze available quantitative data documenting demographic and employment trends among Asians i n Silicon Valley. Our analysis of education, sectoral employment, and occupations draws from the Public Use Mi crodata Sample (PUMSI of the 1 990 Census, which i ncludes i nformation from five percent of the total census sample . These are the only comprehensive data available on immigrants and industry i n the U . S . and u nfortunately are qu ite dated. All of the anecdotal evidence suggests that the Asian presence in Silicon Valley has i ncreased su bstantially since 1 990. We thus believe that the data presented here represent a significant undercount but will need to await the 2000 census for empirical confirmation . 2 O u r analysis o f ethnic entrepreneurship is drawn from a customized Dun &. Bradstreet corporate database of all hig h-tech firms founded i n the Silicon Valley region between 1 980 and 34

Immigrant Entrepreneurs,

Saxeni an and E d u l be h ram

1 99 6 . I n addit ion , we cross-check thes e findings with two other corporate d ata bases of hig h-tech firms, one from Corptech and the other from Venture O n e . The f i n d i n g s o n e t h n i c networks draw f r o m a series of over 1 00 i n-depth i nterviews with ethnic entrepreneurs and e n g i neers i n Silicon Valley hig h-tec h firm s . These i nterviews were conducted during 1 996 and 1 99 7 .

T h e N e w Asian I mmigrants

Asian i m m igration to the U . S . reaches as far back as the latter part of the 1 8t h century, but the modern h i story of i m m igration started with the I m m i g ration Act of 1 9 6 5 . 3 Before this act, Asians were excluded through a variety of Acts based on their race . 4 The Act of 1 96 5 m and ated the a d m ission .of i m m igra nts based on skill rather than race . Although the Act m a i ntained quotas for each cou ntry, i m m igration from Asia rose dramatically after this Act was passed because Asia n s could now i m m i g rate based on skilled labor preferences. While earlier i m m i g rants tended to be drawn from a wide range of backgrou nds, the new Asi a n i m m i g rants a re almost all highly edu cated professionals. The foreig n born population i n the San Francisco Bay Area has grown significantly i n the past two decades. The i m m igrant population of Santa Clara Cou nty, i n the heart of Silicon Valley, doubled to 34 7 , 000 (or 2 3 percent of the total) between 1 9 80 and 1 990, thereby surpassing San Francisco cou nty for the l a rgest concentration of i m m igrants i n the entire Bay Area (Alarcon 1 99 7 1 . The concentration of i m m i g rants i s even g reater within the hig h-tech sector of the economy. I n 1 990, 30 percent of Silicon Valley's hig h-tech workforce was fore i g n born , and of t h o s e , 64 percent were of A s i a n orig i n . 5 Moreover, Asian i m m i g rants are even more highly conce ntrated i n the professional occu pati ons: i n 1 990, a third of all scientists and engi neers i n hig h-tech industries were foreign born, and 67 percent of those were Asi a n . Because the m ajority ( 6 2 percent) of these skilled i m m i g rants a re of Chi nese6 or Asian I n d i a n ori g i n , t h e rest of t h i s article focuses primarily o n t h o s e t w o groups. C h i nese and Indian ( i m ) m i g ration i nto the Silicon Valley reg ion is a relatively recent phenomenon. I n 1 990 there were 2 8 , 5 20 people of Asian Indian descent and 9 2 ,020 of C h i nese 35

Berkeley Planning Journal

descent i n the region. As Figure 1 shows, only 5 percent of the Indians and 1 9 percent of the Chi nese were born i n the U . S . ' , 90 percent o f t h e Indians immigrated after 1 9 70 and 6 0 percent immigrated after 1 9 80. Compared to the Indians, the Chi nese are less recent im migrants: 67 percent immigrated after 1 9 70; 42 percent after 1 9 80. Thus, the bulk of Silicon Valley's population of Chi nese and Indian ethnic orig i n are recent i m m igrants. Figure 1

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