Business

Entrepreneurship in the US and India: Competitive Advantage

Duke University reports that immigrants are behind 25% of the startups created in the USA between 1995 and 2005. More striking than the total number, however, was the dominance of Indian entrepreneurs. They founded 26% of tech startups - more than those created by immigrants from the four next biggest sources combined - UK, China, Taiwan and Japan.

Entrepreneurship is important, creating jobs and adding to economic growth:

Immigrant entrepreneurs’ companies employed 450,000 workers and generated $52 billion in sales in 2005, according to the survey.

As to why immigrants do so well, the article explains:

“The advantage of entrepreneurs is that they’re generally creating new opportunities and new wealth that didn’t even exist before them,” Saxenian said. “Just by leaving your home country, you’re taking a risk, and that means you’re willing to take risks in business. You put them in an environment that supports entrepreneurship, and this is the logical outcome.”

There is an interesting lesson here for America. The question is best posed by the author of the study, Vivek Wadhwa (also a Delhi-born American)

“The bottom line is: Why aren’t these people citizens?” Wadhwa said. “We’re giving away the keys to the kingdom. This is a big, big deal once you figure out what this means for U.S. competitiveness.”

Technology & Entrepreneurship in India

India itself is witnessing a mini-boom of sorts. BusinessWeek reports that Cisco is relocating 20% of its top executives to India and investing $1.1 billion. This, in anticipation of India’s infrastructure needs of $300 billion, with $40 billion in the telecom sector alone.

The massive opportunity is a godsend for intellectual immigrants and India is seeing a return of the prodigals. The Times reports that over 32,000 britons, mostly of Indian origin, have recently moved from the UK to India, to work and start their own businesses.

The rapid development of India’s hi-tech economy has created particularly attractive opportunities for second and third-generation Anglo-Indians, who are using their knowledge of both cultures to seize the chance to develop their careers, earn comparatively high salaries and enjoy a luxurious standard of living that they could not dream of in Britain.

So, Indians do well abroad; and foreigners do well in India. What of the Indians in India? They aren’t left out on a limb. Consider that the recent TiE-Canaan Entrepreneurship Challenge garnered over 100 business plans. Proto.in, an entrepreneurship conference was so swamped with submissions it had to extend its deadline. And if the IIM’s are anything to go by, graduates are going the startup way, ignoring the glitzy world of investment banking. For those who really want it, there are a host of incubators and angel and venture capital investors.

The Competitive Advantage of Entrepreneurship

The existence of so many startups in America is no accident, and immigrants do not simply go to America and create enterprise. Rather, many go to America because they can create enterprise.

The ability of the US to attract the best international talent is then, a measure of the country’s competitive advantage. It is a sign not simply of good education and health, a flexible labor market, functioning infrastructure and small government, or a well marketed economic philosophy. It indicates a heady mix of all of these.

However, if it is the result of a competitive advantage, the ability to attract talent is also, itself a competitive advantage. The presence of risk-taking entrepreneurs, and their visible success, attracts even more entrepreneurs. Entrepreneurship begets entrepreneurship.

For India and other countries hoping to climb up the economic food chain there is a lesson here. In the long-term, and other things being equal, the only competitive advantage may well be human capital.

There are many people that are content where they are. There are some that will travel to more comfortable places for a better life. But there are relatively few that will go absolutely anywhere for a life that shapes their aspirations. It is those that we, as a country, want to retain and attract. Get a few things right and create a culture of risk-taking. Then let these people figure out the rest.

© 2007 The Discomfort Zone.