Innovation & Entrepreneurship

Research shows diversity drives value, innovation

Immigrant inventors produce more patents than native U.S. citizens, among other key findings, according to a new Entrepreneurship Center report.

Illustration of hands and arms of different colors holding up a glowing light bulb.
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Carolina’s latest addition to the must-read list for entrepreneurs and innovators focuses on the value of diversity in team-building.

In January, the Kenan Institute of Private Enterprise and the UNC Entrepreneurship Center created the inaugural Trends in Entrepreneurship Report to broaden the knowledge base and conversation on issues such as founder diversity, funding sources and the value of startup incubators and accelerators.

Vickie Gibbs

Vickie Gibbs

Vickie Gibbs, executive director of the Entrepreneurship Center, answered a few questions from The Well about the report, its importance to innovators, some past findings and what the November report will say about diversity and immigrant entrepreneurship.

Why pay attention to the Trends in Entrepreneurship Report?

We created the Trends in Entrepreneurship Report to provide a way to translate academic research into actionable insights and trends for those in the entrepreneurial ecosystem, innovators and policymakers. Entities like Venture for America and NC IDEA, as well as entrepreneurs and investors, are using the information to further their work and inform their stakeholders of trends in the entrepreneurial ecosystem. To keep stakeholders apprised of updated findings, we issue quarterly reports to supplement the annual report, which will be published each April. The June 2020 quarterly report examined the impact of COVID-19 on business. It evaluated the efficacy of governmental interventions and provided insights to guide next steps for policymakers, entrepreneurs and business leaders to navigate the pandemic.

Our reports combine data with expert analysis, giving timely insights into topics that significantly affect entrepreneurs, funders, ecosystem partners, policymakers and others in the innovation economy. By translating rigorous academic research into accessible and actionable information for the entrepreneurial community, we inform practitioners’ decisions and encourage them to explore further research ideas by scholars.

Can you give us a sneak peak into the November quarterly report and some of the key takeaways?

Sure. The November report focuses on research and insights in two critically important areas: recruiting and hiring diverse talent; and the impact of immigrant entrepreneurship and immigrant entrepreneurs on the U.S. economy. The rapidly changing demographics of the U.S. workforce reflect more diverse employees.

Research finds that more diverse teams outperform their more homogeneous peer groups on a wide variety of measures, including financial returns and growth in market share and new markets. In addition, multicultural teams can spur more impactful innovation.

Immigrants account for 25% of the entrepreneurship and innovation in the U.S. These workers — who are often found in higher-risk businesses such as food care, transportation and other service sectors — are being affected disproportionately hard during the pandemic. The report also dives into U.S. immigration policy and some of the unintended business consequences of the policies.

What does the research tell us about the impact of immigration on innovation and entrepreneurship?

Business ownership rates tend to be higher for immigrants than for native-born citizens. And while self-employment rates and new business formation have increased among immigrants, these measures have decreased among native-born U.S. citizens. Inventors who immigrate to the United States at the age of 20 or older produce more patents, patent citations and patent-derived economic value than native citizens. Between 1976 and 2012, despite being 16% of inventors, immigrants were responsible for 23% of patent production.

In recent months, it has become more difficult for immigrants to enter the U.S. In April 2020, the Trump Administration suspended the entry of foreign workers on some visa types. In June, it extended the suspension until at least December, saying that the new suspension will allow American workers, many displaced by the pandemic, to be hired over their foreign counterparts. Many industries reliant on foreign talent spoke out against the new rules, and the U.S. Chamber filed a lawsuit against the restrictions to work visas.

These regulations may have unintended consequences. Recent research shows that multinational firms faced with visa constraints may choose to offshore their operations and hire the labor they need at their foreign affiliates. One of the primary debates surrounding the policy discussion of employment-based immigration in the United States is whether it crowds out the employment opportunities for native workers. The research is somewhat mixed on the impact immigrants have on the native-born workforce.

There is currently no direct mechanism for immigrants to live in the United States for the purpose of starting a business. Some policymakers have advocated for a “startup visa,” which would provide a visa for immigrant entrepreneurs who can demonstrate a sufficient level of external funding for their ventures.

What other findings on diversity does the report contain?

Diversity matters for businesses. Research indicates that more diverse teams outperform their peers on a wide variety of measures. Companies with a diverse workforce have above average financial returns. Firms with diverse leadership are 45% more likely to report growth in market share and 70% more likely to experience growth in a new market.

Multicultural teams can spur more impactful innovation. A Harvard study that surveyed millions of scientific papers by U.S.-based authors found that papers by ethnically diverse co-authors were cited more frequently and published in higher impact publications

Diversity and inclusion (D&I) are also important in attracting talent, with these factors being critical to job seekers when they evaluate an offer. Surveys show generational differences in the importance of diversity and inclusion when job seeking with 47% of millennials, 33% of Generation X and 37% of baby boomers who consider D&I an important factor in their next job.

Companies use evidence-based strategies to promote greater diversity in recruiting, hiring and retaining a diverse force including highlighting how diversity and inclusion matter to an organization during the recruitment process. Another strategy is to recruit from predominantly minority or female institutions of higher education.

Where can we find this report and more on these findings?

Read the past two reports and upcoming November report at Frontiers.unc.edu.