A Reverse Brain Drain

Although most of the national immigration debate originates with those who want to limit immigration, U.S. policymakers should be focusing on the more important task of attracting and keeping more highly skilled foreign-born scientists and engineers. The future strength of the nation’s economy will depend on the creation of vibrant new companies, and the development of innovative products and services will be produced by well-paid workers. In recent years, immigrants have been playing a rapidly expanding role as high-tech entrepreneurs and inventors, providing an essential service to the country.

The danger is that the United States is taking this immigrant contribution for granted at a time when changes in the global economy are providing alternative career opportunities for the most talented people. In the past, the United States was clearly the best place for the most talented scientists and engineers to work, and there was no need to do anything special to attract them. Those days are gone, and the United States must begin paying more attention to what is necessary to attract foreign talent and taking steps to eliminate barriers to immigration.

Even as the immigrant contribution to U.S. high technology grew steadily from 2000 to 2008, anecdotal evidence began to surface in the popular media and in the professional electronic networks of the emergence of a countertrend. Immigrants with technology and science skills were becoming more likely to leave the United States. Encouraged by the development of high-technology industries in their home countries and by the prospects for rapid economic expansion, they began to see their homelands as places of equal if not greater promise.

When immigrants recognized that they could pursue their career objectives outside the United States, they were able to consider other factors such as closeness to relatives, cultural appeal, and quality of life when deciding where to work. They were also able to think more about the U.S. immigration policies that keep over 500,000 highly skilled immigrant workers in limbo for years with little opportunity to advance or change jobs. With the current economic crisis darkening job prospects and evidence of growing U.S. xenophobia, it is no surprise that many immigrants who came to the United States for school and short-term jobs are heading home. President Obama even signed an economic stimulus law that includes a provision that makes it harder for some companies to hire non-U.S. citizens.

During the closing decades of the 20th century, roughly 80% of the Chinese and Indians who earned U.S. Ph.D.s in science, technology, engineering, and mathematics (STEM) fields have stayed in the United States and provided a critical boost to the nation’s economy. Perversely, now that China and India are becoming formidable economic competitors, the United States seems inclined to enhance their economic productivity by supplying them with an army of U.S.-trained scientists and engineers. These returnees are spurring a technology boom in their home countries, expanding their capacity to provide outsourcing services for U.S. companies, and adding increasingly sophisticated primary R&D capability in knowledge industries such as aerospace, medical devices, pharmaceutical research, and software design.

One obvious sign of U.S. complacency about these developments is the absence of data to confirm the anecdotal evidence. In spite of all the controversy surrounding immigration policy, the government has not bothered to determine how much immigrants contribute to the economy or to assess the likelihood and consequences of a major shift in their desire to work in the United States in the future. To fill this gap, the Global Engineering and Entrepreneurship project at Duke University has attempted to quantify the role of immigrants in founding entrepreneurial companies and developing new technologies, to understand how federal policies affect decisions about working in the United States, and to assess the competing opportunities in India and China and the other factors that influence life decisions.

With financial support from the Kauffman Foundation, a research team including Gary Gereffi of Duke University, AnnaLee Saxenian of University of California at Berkeley, Richard Freeman of Harvard University, Ben Rissing of the Massachusetts Institute of Technology, and Guillermina Jasso of New York University spent three years conducting multiple surveys of thousands of technology and engineering startup companies, interviewed hundreds of company founders, surveyed more than 1,000 foreign students and more than 1,000 returnees, and made several trips to India and China to understand the on-the-ground realities in those countries.

U.S. immigration policy has been made in an information void. Although our research is far from conclusive, we believe it is fair to say that current immigration policy significantly undervalues the contributions these skilled immigrants make to high-growth segments of the U.S. economy. It appears that immigrants spur innovation in the United States and even help foment innovation by non-immigrants. At present, U.S. technological preeminence is not in question. Furthermore, some degree of intellectual dispersion and circulation is inevitable and valuable to the global economy. The United States cannot expect to maintain its previously overwhelming technological superiority in an increasingly globalized economy. But it takes a rare blend of short-sightedness and hubris to fail to investigate trends in the movement of global talent or to reconsider immigration policies that are not only economically counterproductive but also potentially damaging to U.S. national security.

Innovators with accents

AnnaLee Saxenian’s 1999 report Silicon Valley’s New Immigrant Entrepreneurs was the first comprehensive assessment of the critical role that immigrant capital and labor were playing in Silicon Valley’s regional economy. She found Chinese and Indian engineers at the helm of 24% of the Silicon Valley technology businesses started from 1980 to 1998. Even those scientists and engineers who returned to their home countries were spurring technological innovation and economic expansion for California by seeding development of companies in the Golden State.

We updated and expanded her research with a nationwide survey of engineering and technology firms founded between 1995 and 2005. By polling 2,054 companies selected randomly from the Dun & Bradstreet Million Dollar database, we found that in one of four companies, the chief executive officer or chief technologist was foreign-born. A regional survey found that immigrant entrepreneurs were prominent in New York; Chicago; San Diego; Boston; Washington, DC; Austin; Seattle; Denver; and elsewhere. We estimated that in 2005, immigrant-founded tech companies generated $52 billion in revenue and employed 450,000 workers. In some industries and regions, immigrants played a particularly critical role (see Figure 1). In the semiconductor sector, immigrants founded 35% of startups. In Silicon Valley, the proportion of startups that were immigrant-founded had increased to 52%. Immigrants from India founded 26% of the immigrant-founded startups, more than the next four groups—those from Britain, China, Taiwan, and Japan—combined.

Interviews with 144 company founders selected randomly from the original data set of immigrant-founded companies revealed that 3 of 4 had graduate degrees, primarily in STEM fields. The vast majority of these company founders didn’t come to the United States as entrepreneurs: 52% came to study, 40% came to work, and 5.5% came for family reasons. Only 1.6% came with the intention of starting a company.

Founding a company is not the only way to contribute to the economy. We also examined the World Intellectual Property Organization (WIPO) Patent Cooperation Treaty (PCT) records for the international patent filings by U.S.-resident inventors (see Figure 2). We determined that in 2006, foreign nationals residing in the United States were named as inventors or co-inventors in one quarter of WIPO patent applications filed from the United States, a stunning increase from the 7.6% of applications filed in 1998. In some cases, foreign nationals working at U.S. corporations contributed to a significant majority of such patent applications for these companies. For example, immigrant patent filings represented 72% of the total at Qualcomm, 65% at Merck, 64% at General Electric, and 60% at Cisco Systems. More than 40% of the international patent applications filed by the U.S. government had foreign-national authors. And these numbers do not even include immigrants who had become citizens at the time of filing. Our manual inspection of patents found a healthy representation of Chinese and Indian names. Even though each group accounts for less than 1% of the U.S. population, 17% of patents included a Chinese name and 14% an Indian name. Clearly, immigrants are contributing significantly to U.S. intellectual property, a key ingredient for the country’s economic success.

Immigration woes

Surprised by the more than threefold growth in foreign-national patent filings in eight years, we sought to find out whether this was the result of a surge in the number of highly skilled immigrants. When we discovered that neither the U.S. State Department nor the Citizenship and Immigration Services (USCIS) collected these data, we developed a methodology to estimate the population of skilled immigrants.

Foreign nationals who file U.S. international patents include persons who acquire legal permanent residence (LPR) on family or diversity visas, as well as persons with temporary visas such as:

• H-1B temporary work visas, for specialty occupations along with at least a bachelor’s degree or its equivalent;
• L-1 visas, for intracompany transferees (foreign nationals employed by a company that has offices in the United States and abroad);
• F-1 visas, to study or to conduct research at an accredited U.S. college or university.

Students on F-1 visas are allowed to work in the United States in occupations related to their fields of study for up to 29 months. After this, they must obtain an H-1B visa, which is valid for up to six years. To stay permanently, skilled workers need to obtain an LPR visa, which is granted only to those who have an offer of permanent employment offer from a U.S.-based firm. The elaborate and time-consuming approval process entails a number of steps:

1. The employer files a labor certification request with the Department of Labor.

2. Once the labor certification is approved, the employer files a Petition for Alien Worker (Form I-140) with the USCIS. It must demonstrate that the company is in a good financial position and capable of paying the salary advertised for the job.

3. Once the I-140 is approved, the employee must wait for the State Department to provide a visa number, which indicates that an immigrant visa is available for the applicant.

4. The employee must file for adjustment of status (I-485) for him/herself and for family members.

We estimated that as of October 1, 2006, there were 200,000 employment-based principals waiting for labor certification. The number of pending I-140 applications stood at more than 50,232, which was more than seven times the number in 1996. The number of employment-based principals with approved I-140 applications and unfiled or pending I-485s stood at 309,823, an almost threefold increase from a decade earlier. Overall, we estimated there were 500,040 skilled workers waiting for LPR in the United States. The number including family members was 1,055,084.

The reason for the increasing backlog is that only around 120,000 visas are available each year in the key visa categories for skilled workers. Additionally, no more than 7% of the visas can be allocated to immigrants from any one country. Thus, immigrants from large countries such as India and China have the same number of visas available (8,400) as those from much smaller countries such as Iceland and Costa Rica. No one should be surprised that this long and growing queue generates anxiety and frustration among immigrants. We can easily imagine that this predicament will lead to a sizeable reverse migration of skilled workers to their home countries or to other countries, such as Canada, that welcome these workers.

New geography of innovation

An inhospitable immigration policy environment in the United States would not be enough by itself to discourage a large number of high-skill workers. They would also need to have alternative venues for challenging and rewarding work. We therefore decided to visit a cross-section of companies that would employ skilled workers in India and China. In particular, we wanted to learn more about how technology companies in these countries were progressing up the value chain from low and medium value-added information technology services to significantly higher-value services in core R&D, product development and design, and the creation of patents and intellectual property. We met with senior executives of more than 100 local companies and multinationals operating in these countries, toured their R&D labs, and interviewed employees. Although the information we collected is obviously anecdotal, it nevertheless is noteworthy and deserving of further exploration.

We learned that India is rapidly becoming a global hub for R&D outsourcing and is doing so, in part, by leveraging the knowledge and skills of returnees. In the pharmaceutical sector, a number of Indian companies, including Aurigene, Dr. Reddy’s, and Ranbaxy, have significant product development or basic research contracts with major multinational drug companies. These three Indian companies are also recruiting top scientists from the United States for their R&D teams. Dr. Reddy’s hired approximately 100 returnee scientists in 2006 alone. We also found evidence of startup activity in the pharmaceutical industry, with Indian startups relying on research or executive teams with experience working for major U.S. drug companies. For example, Advinus Therapeutics, an early-stage drug discovery company based in Bangalore, was founded by India-born former employees of Bristol-Meyers Squibb.

Technology outsourcing companies such as India’s HCL and TCS are no longer performing only system administration tasks. They are also moving into product design and core R&D in a number of areas, including semiconductor design and aerospace. For example, HCL and TCS teams are designing the interiors of luxury jets, in-flight entertainment systems, collision-control/navigation-control systems, and other key components of jetliners for U.S. and European corporations. These technology companies are also hiring U.S.-educated engineers. For example, HCL hired 350 U.S.-educated engineers between 2000 and 2006. IBM, Cisco, Microsoft, and many other leading U.S. technology companies maintain sizeable operations in India. These facilities are directly competing with the United States for talent and have been successful in attracting top-notch professionals who have been trained or educated in the United States. In IBM India’s advanced research labs, half of the Ph.D.’s are returnees from the United States. In General Electric’s Jack Welch Technology Center in Bangalore, where they are designing some of the company’s most advanced technologies, 34% of the R&D staff are returnees.

The Chinese situation is somewhat different. China is already the world’s biggest exporter of computers, telecommunications equipment, and other high-tech electronics. Multinationals and government-backed companies are pouring billions of dollars into next-generation plants to turn China into an export power in semiconductors, passenger cars, and specialty chemicals. China is lavishly subsidizing state-of-the-art labs in biochemistry, nanotech materials, computing, and aerospace. Despite these efforts, we found that China was far behind India in the size and scope of R&D outsourcing. Rather, multinationals were using Chinese workers to perform significant customization of their technologies and to develop new products for the Chinese market.

In all of the companies we visited in China, returnees from the United States were performing the most sophisticated R&D. Returnees were usually in senior-level management and R&D positions in engineering, technology, and biotech companies. China appears to be in desperate need of Western-educated R&D and management talent and is offering substantial incentives for returnees with these skills.

Our interviews with executives and human resource managers in both countries revealed that the numbers of résumés they receive from the United States has increased as much as 10-fold during the past few years. Indian companies have so many applicants that they often no longer find it necessary to offer salary premiums. In China, returnees still receive wages substantially higher than local averages.

We made several attempts to quantify the reverse migration of skilled workers to India and China and to determine what factors motivated workers to return home, but the United States does not collect such information. We therefore carried out a large survey of returnees to India and China.

Repatriates

We used the LinkedIn network of professionals to identify 1,203 highly skilled Indian and Chinese workers who had worked or received education in the United States and subsequently returned to their home country. The survey was conducted over a period of six months in 2008. Although our method of identifying returnees did not produce a rigorously scientific sample, we consider it at least illustrative, and the fact that we obtained a 90% response rate adds credibility to our results. Though our findings may not generalize to all highly educated returnees, they are representative of a critically important group of young professionals who are sufficiently savvy to be part of LinkedIn.

The average age of the respondents was in the low 30s, and more than 85% had advanced degrees. Among the strongest factors bringing these immigrants to the U.S. initially were professional and educational development opportunities.

To our surprise, visa status was not the most important factor determining their decision to return home. Three of four indicated that considerations regarding their visa or residency permit status did not contribute to their decision to return to their home country. In fact, 27% of Indian respondents and 34% of Chinese held permanent resident status or were U.S. citizens. For this highly select group of returnees, career opportunities and quality-of-life concerns were the main reasons for returning home.

Family considerations are also strong magnets pulling immigrants back to their home countries. The ability to better care for aging parents and the desire to be closer to friends and family were strong incentives for returning home. Indians in particular perceived the social situation in their home country to be significantly superior.

The move home also appeared to be something of a career catalyst. Respondents reported that they have moved up the organization chart by returning home. Only 10% of the Indian returnees held senior management positions in the United States, but 44% found jobs at this level in India. Chinese returnees went from 9% in senior management in the United States to 36% in China. Opportunities for professional advancement were considered to be better at home than in the United States for 61% of Indians and 70% of Chinese. These groups also felt that opportunities to launch their own business were significantly better in their home countries.

Restoring U.S. appeal

One of the reasons to survey those who left the United States was to understand what they liked and disliked about the country so that we might be able to convince them to return. We found areas in which the United States enjoyed an obvious advantage. One was gross salary and compensation: 54% of Indian and 43% of Chinese respondents indicated that total salary and compensation in their previous U.S. positions were better than at home. U.S. health care benefits were also considered somewhat better by a majority of Chinese respondents.

One somewhat surprising U.S. advantage was the ease of settling into the culture. Only 17% of Chinese respondents and 13% of Indian respondents found it difficult initially to settle in the United States, whereas 34% of Indians and 35% of Chinese reported difficulty settling in when they returned home. Significant numbers cited difficulties encountered by their family members. Indians complained about traffic and congestion, lack of infrastructure, excessive bureaucracy, and pollution. Chinese complained about pollution, reverse culture shock, inferior education for children, frustration with government bureaucracy, and health care quality. Because neither China nor India can improve these conditions significantly in the near term, the United States should advertise these relative advantages to foreign-born students and temporary workers.

One encouraging characteristic of the returnees is their mobility; one in four say that they are likely to return to the United States in the future. Offering those who have left the United States better career opportunities and permanent resident status could entice a significant percentage to return. When asked how they would respond to the offer of a suitable U.S. job and a permanent resident visa, 23% of Indians and 17% of Chinese said they would return to the United States, and an additional 40% of Indians and 54% of Chinese said they would consider the offer seriously. Considering that this group of people had already made the decision to make the difficult move back home, the number willing to consider returning to the United States indicates that U.S. immigration reforms could have a significant effect.

Scanning the horizon

Having surveyed young professionals, we turned our attention to the next generation: foreign nationals currently enrolled in U.S. universities. We were curious about how they viewed the United States, how they viewed their home countries, and where they planned to work after they graduated. This cohort is of critical importance to U.S. prospects. During the 2004–2005 academic year, roughly 60% of engineering Ph.D. students and 40% of Master’s students were foreign nationals, and foreign nationals make up a significant share of the U.S. graduate student population in all STEM disciplines. In the past, the overwhelming majority of these students worked in the United States after graduation. The five-year stay rate for Chinese Ph.D.s was 92% and for Indians 85%. Our survey found evidence that this could change dramatically, with serious consequences for the United States.

We used the social networking site Facebook to find 1,224 foreign nationals who are currently studying at U.S. universities or who graduated in 2008. The respondents included 229 students from China and Hong Kong, 117 from Western Europe, and 878 from India. Again, this is not a rigorously scientific sample, but the group is large and random enough to make the results worth considering.

The overall consensus among respondents was that the United States was no longer the destination of choice for professional careers. We learned that most students in our sample want to stay, but not for very long. An encouraging 58% of Indian, 54% of Chinese, and 40% of European students said that they would stay in the United States for at least a few years after graduation if given the chance, but only 6% of Indian, 10% of Chinese, and 15% of European students said they want to stay permanently. The largest group of respondents—55% of Indian, 40% of Chinese, and 30% of European students—wants to return home within five years. More than three-fourths of these students express concern about obtaining work visas, and close to that number worry that they will not be able to find U.S. jobs in their field. With such a dim view of their legal and work prospects, it is no wonder that so few see themselves settling permanently in the United States.

Their assessment of their individual opportunities is reinforced by their view of the overall U.S. economy. Our survey found that only 7% of Chinese students, 9% of European students, and 25% of Indian students believe that the best days of the U.S. economy lie ahead. Conversely, 74% of Chinese students and 86% of Indian students believe that the best days for their home country’s economy lie ahead.

Our survey results led us to some alarming conclusions. The United States is in danger of losing large numbers of talented foreign-national students, particularly those from China and India. The students planning to leave cite the same reasons as the workers who have already done so: career and economic opportunities and the desire to be closer to family. When they look to the future, they see much more potential for economic growth in their home countries than in the United States. The pull of growing opportunities at home is reinforced by the push of immigration and visa rules that make the students uncertain about their ability to work in the United States.

Our study was not longitudinal, so all we can do is compare the stated intentions of current foreign-national students with the paths actually followed by their predecessors. If we accept the results at face value, the United States is facing a potentially disastrous exodus of young scientists and engineers who are likely to be among the world’s most productive inventors and engineers. Even if the loss of foreign nationals is only half as bad as our surveys indicate, there will still be serious economic consequences.

Turning the tide

Our research points to critical insights about U.S. history and its future. Looking back, we see that foreign nationals have played a much larger role in founding new companies and developing new technologies than was generally understood. Looking forward and having come to appreciate the importance of foreign nationals to U.S. economic strength, we now face the likelihood that a large number of these highly productive individuals will be leaving the United States and using their skills to enrich the economies of other countries, particularly the emerging global powerhouses of China and India. The United States is no longer the only place where talented people can put their skills to work. It can no longer expect them to endure the indignities and inefficiencies of an indifferent immigration system, and it must now actively compete to attract these people with good jobs, security, and other amenities.

The trends we have detected cannot be ignored. As an essential first step, the United States should fund research to confirm or overturn our findings. We acknowledge that our analysis is far from definitive. We need to know much more about the sources of U.S. economic success, the capability and potential of the Indian and Chinese tech sectors, the plans and aspirations of the many foreign nationals studying in U.S. universities, and the effect that immigration policies and procedures are having on the desirability of life in the United States. Perhaps the problem is not as grave as our studies indicate or the causes are different from what we found, but it seems highly unlikely that further research will fail to confirm the general tenor of our findings.

In the meantime, the United States can take several low-cost and low-risk actions that could have a salutary effect on the attitudes of foreign-national students and workers toward staying in the United States. To start with, it can increase the numbers of permanent resident visas available for skilled professionals and accelerate visa processing times. This will encourage the million who are already here to begin to lay down deeper roots. They may decide to start companies, buy houses, and accept the United States as their permanent home. Additionally, because concern about their extended families seems to be an important reason for returning home, the United States could also make it easier for highly valuable workers to bring their parents to the United States.

Human talent, especially in science and engineering, is becoming ever more essential to national well-being, and no country has benefited more than the United States from the influx of talent from other countries. The competition for that talent is clearly intensifying. One can hardly imagine what combination of arrogance, short-sightedness, and plain foolishness would be necessary to convince U.S. policymakers to ignore this emerging reality. At the very least, the United States should remove any barriers to talented foreign nationals who want to work in the United States. And if our findings are accurate, the nation should be taking many steps to attract top talent and to keep it.