A Winning Combination

When immigrant and U.S.-born entrepreneurs team up, their startups perform better than those founded by either group alone, according to a new study.

An analysis of nearly 91,000 U.S. startups founded between 2000 and 2022 by Professor Amir Kermani, Associate Professor Timothy McQuade, and Zhao Jin of the Cheung Kong Graduate School of Business found that companies with mixed founder teams grow faster, employing 20% more people than native-only ventures three years after launch. They also raise larger funding rounds and are more likely to be acquired or go public.

“By exploiting these broader networks, they get higher-quality labor, higher-quality sources of capital, and more product market access,” says McQuade.

While the economic consequences of high-skilled immigration are multifaceted and complex, significant evidence suggests that immigrants play an important role in U.S. innovation and the creation of new companies. For example, the analysis showed that immigrants constituted 23% of the total workforce in STEM occupations. As of 2022, the four most valuable private, venture-backed U.S. companies (SpaceX, Stripe, Instacart, and Databricks) had immigrant founders, as did three of the most valuable public companies globally (Alphabet, Nvidia, and Tesla). 

For this project, the researchers were interested in whether collaborations between immigrant and native entrepreneurs lead to greater startup success. “We wanted to understand whether mixed entrepreneurial teams could create synergies leading to higher employment, larger funding rounds, and more successful exits,” says McQuade.

While the benefits of having co-founders from different countries vary, they all stem from these collaborations leading to expanded access to labor, capital, and markets. 

For instance, when considering the employees of various startups, the researchers showed that those founded by joint immigrant–native teams hire 27% more immigrant employees than U.S. native-only companies and that these employees also appear to be better at their jobs, as measured by the rate of internal promotion.

“And it’s not just that the immigrants themselves are more productive,” Kermani says. “What makes this secret sauce is very much the mixing of these teams: Each person brings to the table something the other side doesn’t have.”

That same logic plays out in the financing of startups and in their access to markets within the U.S. and overseas. Not only are they filing more patents, but they are also more likely to do so in other countries, suggesting greater global market penetration. 

The research also highlighted the critical role that educational institutions play in developing international partnerships. About 30% of the companies examined in the study were formed in universities. In addition to admitting diverse classes, Kermani says universities can create opportunities for different groups to collaborate.

“This is not a zero-sum game where the gains are only going to one group,” he says. “Together, we can produce something much more than we would otherwise, and everyone is going to benefit from that.”