Why Indian and Chinese entrepreneurs are leaving America

As I explained in my last piece, skilled immigrants are leaving the U.S. in droves. This is because of economic opportunities in countries like India and China, a desire to be closer to family and friends, and a deeply flawed U.S immigration system. It doesn’t matter whether we call this “brain drain” or “brain circulation”– it is a loss for America. Innovation that would otherwise be happening here is going abroad.

With all the stories we read about weak infrastructure in India, authoritarianism in China, and corruption and red tape in both countries, the perception is that these entrepreneurs are facing major handicaps back home. They have no chance of competing with us, so we have nothing to worry about, right?

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Wrong.

My team at Duke, UC-Berkeley, and Harvard just completed a research project for which we surveyed 153 skilled immigrants who had returned to India to start companies and 111 who went back to China. The title of the paper, which Kauffman Foundation released today, tells the story: The Grass is Indeed Greener in India and China for Returnee Entrepreneurs. Here is what we learned:

Why did they return?

The most significant factors drawing both Indians and Chinese entrepreneurs home were economic opportunities, access to local markets, and family ties. More than 60% of Indian and 90% of Chinese returnees said the availability of economic opportunities in their countries was a major factor in their return. Seventy-eight percent of Chinese entrepreneurs were lured by the attraction of local markets as were 53% of Indian entrepreneurs. And 76% of Indian entrepreneurs and 51% of Chinese entrepreneurs said it was family ties that brought them back home.

The returnees took pride in contributing to their home country’s economic development. More than
60% of Indian and 51% of Chinese entrepreneurs rated this as very important. Government incentives weren’t at all important for the Indians surveyed, but did lure back 23% of the Chinese. And Only 10% of Indian and Chinese entrepreneurs left the U.S. because they had to; others may have been frustrated with their visa situation, but had other, more important reasons for returning home.

How does their situation back home compare to the U.S.?

Surprisingly, 72% of Indian and 81% of Chinese returnees said that the opportunities to start their own businesses were better or much better in their home countries. Speed of professional growth was also better back home for the majority of Indian (54%) and Chinese (68 percent) entrepreneurs. And the quality of life was better or at least equal to what they’d enjoyed in the United States for 56% of Indian and 59% of Chinese returnees.

What are the advantages of doing business in India and China?

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Among the Indian nationals surveyed, the strongest common advantage to entrepreneurs who had moved home was lower operating costs; among the Chinese nationals, it was access to local markets. In India, 77% ranked operating costs and 72% ranked employee wages as very important advantages; in China, 64% and 61% did. In China, 76% ranked access to local markets as very important. In India, 64% did. The availability of qualified workers was perceived as a more significant advantage in India than in China, with 60% in India and 43% in China saying this was very important.

Optimism about the country and economy also makes a big difference. Indian and Chinese entrepreneurs both (55% and 53%, respectively) saw the mood in their countries as a very important advantage. And as you would expect, given the support that the Chinese government provides businesses, far more Chinese entrepreneurs (31%) consider government support very important than their Indian (7%) counterparts.

What’s the American advantage?

The only advantage respondents typically indicated that the U.S. offered was in the salaries received— 64% of Indian and 43% of Chinese respondents said the salaries had been better in the United States than they were at home.

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It’s not all bad news

There is a silver lining to this cloud. Yes, entrepreneurs are returning home and fertilizing the
entrepreneurial landscape back home. And yes, we would benefit if all this entrepreneurship was in the U.S. But there is also a two-way “brain circulation” happening—with potential benefit to both the U.S. and these emerging economies.

Returning entrepreneurs are maintaining close and continuing contact with friends and family,
colleagues, customers, partners, and sources of business information in the U.S. Indian returnees said they were visiting the U.S. between two and three times over the previous two years, and Chinese said they visited more than four times in that period. A majority said they had monthly or more frequent contact with former colleagues in the U.S.; more than a quarter have contact with U.S.-based colleagues at least weekly. A majority also exchange information about customers and collaborators, markets and technology, or organizations with people in the U.S. at least monthly; approximately one-third exchange information about customers and collaborators with colleagues in the U.S. weekly or more frequently.

Returnees are also exploiting their privileged position in the world economy: building businesses that take advantage of their access to the lower costs, growing markets, and business networks in their home countries but maintaining close ties also with customers, collaborators, and sources of information in the U.S. The accumulation of linkages between entrepreneurs in regions such as Bangalore and Beijing and entrepreneurs in the U.S. offers opportunities for mutually beneficial growth.

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UC-Berkeley School of Information dean AnnaLee Saxenian documented this dynamic in her book, The New Argonauts. She noted the positive dynamic at work in the relationships between entrepreneurs and institutions in Taiwan and Israel and Silicon Valley: each benefit from participation in the decentralized, cross-regional collaborations that support innovation in today’s global economy.

In the new world order, we’re going to be competing and collaborating. The U.S. will not be the only land of opportunity and it will not be the only land of innovation. We can’t turn the clock back now and keep the entrepreneurs who have already left, but we can certainly try to increase our competitive odds by keeping those who are already here—and who want to be playing on our team, from leaving.

Vivek Wadhwa  is a visiting scholar at the School of Information at UC-Berkeley, director of research for the Center for Entrepreneurship and Research Commercialization at the Pratt School of Engineering at Duke University, and senior research associate for the Labor and Worklife Program at Harvard Law School. To read his previous article in this series, click here.

[Image via masochismtango/Flickr]

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