Richard Herman's Response to Fund for Our Economic Future Research (Why It Believes Immigrant Entrepreneurship Is Not a Good Economic Development Investment)

7/26/2019 Richard Herman's Response to Fund for Our Economic Future Research (Why It Believes Immigrant Entrepreneurs…

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---------- Forwarded message ----------From: Richard Herman <[email protected]>Date: Fri, Oct 31, 2008 at 2:00 !"#$%ect: &e: 'o#r (omments on !) *hite a+er

o: "cott "hane <[email protected]#>

Dear Professor Shane: Thank you for contacting me. I wish you had earlier contacted me or any of my colleagues whowork on immigration-related economic development issues in Northeast hio or nationwide.

It is my understanding that !ichael "old#erg of $ridge %apital made an e-introduction to usseveral months ago in response to your in&uiry of him on an immigration investment program for

a research pro'ect you were working on. (s you may remem#er) I responded to you #oth #y offering to speak with you. I did not receivea response. I do appreciate your response #elow intimating that increasing immigrant entrepreneurship)talent * capital would #e a significant economic multiplier for the region.

+owever) I,m not sure how you can properly assess I of economic development investmentsin promoting immigrant entrepreneurship) innovation) capital-attraction ---- when your earlierstated position on immigrant entrepreneurship is a misinterpretation of the data. /irst) you state in your Illusions #ook that Immigrants are not more likely than the native #orn to start their own #usiness. 0ou state this in the conte1t of de#unking a myth a#outimmigrant entrepreneurial performance and discrediting the story that increasing andsupporting immigrants will #oost start-up activity in the 2.S. 0our position does not comport with the vast amount of research on this issue. Immigrants are far outpacing native-#orn (mericans in self-employment and the creation ofincorporated enterprises) #oth in terms of the rates of new #usiness creation and in terms of percentages of total population. Please see: http:33www.migrationinformation.org32S/ocus3display.cfm4ID5678http:33www.kauffman.org3Details.asp14id5897http:33www.chicagofed.org3cedric3files3;<=immigrant=entrepreneurs.pdf In your #ook) which provided much of the #asis for your >hite Paper) you cite the followingarticles to support your conclusion that immigrants are not more likely than the native #orn tostart their own #usiness:

http://www.migrationinformation.org/USFocus/display.cfm?ID=301

http://www.kauffman.org/Details.aspx?id=1802

http://www.chicagofed.org/cedric/files/LV_immigrant_entrepreneurs.pdf

http://www.kauffman.org/Details.aspx?id=1802

http://www.chicagofed.org/cedric/files/LV_immigrant_entrepreneurs.pdf

http://www.migrationinformation.org/USFocus/display.cfm?ID=301



P. eynolds) ;a#or /orce Participation and esidential Tenure) in Handbook of

Entrepreneurial Dynamics) ed. "artner) et al.) ?-@@A B. Sanders and <. Nee) Immigrant SelfCmployment: The /amily as Social %apital and the <alue of +uman %apital) AmericanSociological Review ?8 8EE?F: 68-GEA S. +ipple) Self-Cmployment in the 2nited States: (n2pdate) Monthly Labor Review) Buly 77G) 86-6.

The +ipple article deals only with self-employment) and e1plicitly e1cludes data related to theformation of incorporated enterprises. The eynold,s article also supports its findings on a self-employment study #y the %enter forImmigration Studies) an organiHation with a long-standing anti-immigrant #ias Its e1ecutivedirector) Paul rikorian has a new #ook out as well: The New %ase (gainst Immigrants: ;egaland IllegalF. eferring to the full spectrum of immigrant entrepreneurship) eynold #egins thisarticle with the statement: (ll over the world) immigrants are more likely to participate in new #usiness creation than natives. ;ight) 8EE@) >aldinger 8EE7) etc.F

I could not locate a copy of Nee) Sanders article on the net) #ut a re&uest has #een made to Dr. Nee to share a copy.

Second) I am not sure how you can properly evaluate I on investments to promoteentrepreneurship in the region when your position appears to #e that less entrepreneurship is agood thing in the national economy e.g.) fundamentals of economy are sound when there is lessentrepreneurship and more employment at large corporationsF.

/ortunately) (mericans are $ecoming less likely to Start $usinessesSmall $usiness Trends) Startup Trends) Scott Shane) Banuary 9) 779 http:33www.small#iHtrends.com37793783fortunately-americans-are-#ecoming-less-likely-to-start- #usinesses.html3 In light of the massive 'o# loss in (merica) the fiasco of financial market de-regulation) and theclosing and downsiHing of large employers) it seems that promoting entrepreneurship should #e a priority as a way to diversify our employer-#ase) create financial security and individualresponsi#ility. Third) you vastly overstate the costs of making Northeast hio a welcoming destination forimmigrant talent) entrepreneurs and capital. I,m not sure how you came up with the JK)777 costto recruit3resettle each immigrant) now am I clear on which immigrant demographic you wereanalyHing e.g.) refugee vs. Ph.D.F . 0our >hite Paper did not evaluate any immigrant attractionor integration programs. There are many such programs for you to review and evaluate. >ithoutevaluating such programs) I,m not sure how you can make a cost pro'ection. Since much ofyour paper and #ook is #ased on your own research) I would encourage you to share it with thosewho are interested. I would #e particular interested in hearing of any programs that have usedyour hypothesis to recruit attractive entrepreneurs who are venture-capital ready) especially toa region with work-skills and educational attainment on the low-end of the scale.

http://www.smallbiztrends.com/2008/01/fortunately-americans-are-becoming-less-likely-to-start-businesses.html/






/or the fraction of the costs that are currently spent on economic development in NC) we couldimplement an effective immigrant talent attraction * welcoming initiative. NC is #lessed withmany e1isting resources to do immigrant talent attraction and integration. +owever theseresources are not coordinated. It is not a &uestion of sufficient financial and other resources) it isa &uestion of will) fear) and misinformation.

/ourth) and in addition to the issue surrounding immigrant entrepreneurship) I disagree with youon your analysis on the low-priority3low-I assessment of the role that high-skill talent andtechnology research plays in the creation of high-growth) new-economy enterprises. I think it iscritical that the economic development organiHations in the region colla#orate around theseissues. The importance of deep pools of high-end tech talent which is predominantly foreign-#ornF andtech research which largely emanates from) or in cooperation with) universitiesF to #uilding aself-sustaining tech ecosystem in Northeast hio should #e reflected in the funding priorities ofthe region,s foundations.

In this regard) you grossly underestimate the value of immigrant high-tech talent) innovation) andentrepreneurship on attractive entrepreneurial activity.http:33www.ccis-ucsd.org3P2$;I%(TINS3wrkg8K.PD/ (ttracting mo#ile immigrant talent to the region is likely the most cost-effective way to &uicklyupgrade the region,s workforce) increase worker productivity and enhance employercompetitiveness) which will in turn attract new employers and entrepreneurs) as well as create aspill-over effect of high-tech employees starting their own companies in the region that they areemployed in. %onversely) without ade&uate skill levels in the local workplace) high-growth tech entrepreneurswill #e less likely to relocate to NC. Please see:>orking Paper 7?-7K) (pril 77?Dash#oard Indicators for the Northeast hio Cconomy:Prepared for the /und for ur Cconomic /uture) /ederal eserve $ank of %leveland #y andall C#erts) "eorge Crickcek) and Back leinhenH ur analysis suggests that a skilled workforce is the primary driver of economic growth. f the eight factors) this factor is the most highly correlatedwith growth in three of the four areas of economic activity investigated: output) per capita income) and productivityL The Dash#oard paper also highlighted the importance of promoting inclusion of minorities)including (sians) ;atinos) (frican (mericans) immigrants and others not fully represented in themainstream. ---------

http://www.ccis-ucsd.org/PUBLICATIONS/wrkg15.PDF




I understand the scope of your paper. 0ou were looking at pro'ects that would give the #iggest #ang for the #uck in developing attractive high growth companies.

+owever) #ecause of your assumptions referred a#ove) I #elieve you grossly under-valued the

role of immigrants in creating high-tech innovatino) attractive high growth companies) in in-sourcing foreign direct investment into the 2.S.) creating 'o#s and generally creativing morevi#rant) glo#ally-connected) destinations. (s a result) you miss the opportunity in attracting andwelcoming this demographic) and dismiss wihout analyHing or even identifyingF specificimmigrant talent attraction3welcoming programs as too costly and therefore low I.

-------- In terms of the immigrant talent piece) there is increasing amount of appreciation and willingnessto colla#orate in the region:

Immigration Initiative of the "reat ;akes %ham#ers of %ommerce %oalition)67 cham#ers of commerce) 8 statesFhttp:33www.detroitcham#er.com3docs3#iHagenda.pdf State of hio,s newly-issued Cconomic Development Plan:http:33development.ohio.gov3strategicplan3documents3"oal6=8Page.pdf There is increasing activity on securing licensure from the Department of +omeland Security tooperate a /oreign Investor egional %enter see previous references to >ooster,s CconomicDevelopment C$-K initiativeF. ( team in Northeast hio has worked to #uild a coalition of venture capitalists) scientists) andentrepreneurs in applying for a local chapter of the worldwide TiC organiHation. TiC originallyThe Indus Cntrepreneur association is #ased in Silicon <alley) was formed #y Indian Immigranttechnology entrepreneurs in the 8EE7s) and now has over K7 chapters and 8)777 mem#ersworldwide. It is one of largest glo#al networks of technology entrepreneurs and their partners inthe world. www.tie.org There is something else to #uild-on. ;ikely over 83 of the companies in the $ioCnterprise portfolio and nearly 836 of the companies in the BumpStart portfolio have immigrantfounders. ver ?)777 international students attend Northeast hio colleges and universities)contri#uting over J877)777)777 per year in tuition and living e1penses. Silicon <alley knows thevalue of international talent attending its universities. There is something else to #uild-on. ;ook at the hundreds of immigrant professionals and theirfamilies largely %hinese and IndianF moving into the region) and settleing in the school-richsu#ur#s of Solon) Strongsville) $roadview +eights) Twins#urg) etc. These families speak of Northeast hio in glowing terms) appreciating the educational amenities that are so important toimmigrant families as well as low cost of livingF.

http://www.detroitchamber.com/docs/bizagenda.pdf

http://development.ohio.gov/strategicplan/documents/Goal3_1Page.pdf

http://www.tie.org/

http://www.detroitchamber.com/docs/bizagenda.pdf

http://development.ohio.gov/strategicplan/documents/Goal3_1Page.pdf

http://www.tie.org/



//C/ should #e evaluating ways to colla#orate on this and similar other issues as a way toaccelerate the formation of attractive entrepreneurial activity in Northeast hio. (s statedearlier) considering the well-documented role that immigrant talent plays in the new economy http:33www.ccis-ucsd.org3P2$;I%(TINS3wrkg8K.PD/ F

NC needs policies that prioritiHe and welcome the inclusion of immigrant talent)entrepreneurship and capital. >hile the philosophy of the J877 million dollar economic development fund in Detroit) the NewCconomy Initiative) is vastly different from //C/) it is interesting to see that talent and culture play a #ig role in its mission to spur attractive 'o#-creating economic activity in SC !ichigan.

http:33www.neweconomyinitiative.org3 The following may also #e helpful to you in understanding the role that non-tech immigrant

entrepreneurship plays in ur#an renewal and to the #roader &uestion of economic vi#rancy of theregion: 8.F !ichael Porter: ;arge num#ers of immigrants and their #usinesses in 2.S. cities often sparkgrowth in 'o#s and household incomes M and even #roader economic activity in thoselocalesL.Porter found that the K.K million immigrants who live in inner cities are key catalyststo economic growth and ur#an investment. The immigrants ,change the very face ofentrepreneurship in inner cities, and ,provide a much-needed shot of economic vi#rancy todistressed neigh#orhoods), said Porter. 2S( Today) Novem#er) 77K .F ( study from the 2r#an (ffairs %ollege at %leveland State 2niversity found encouragingimmigration might therefore #e a component of a #roader strategy to reverse neigh#orhood #light) increase housing and consumer demand) and supply a new entrepreneurial #ase for thefuture. Immigration and 2r#an Development Implications for "reater %leveland) ProfessorSanda aufman) Ph.D.) et al. ) !a1ine "oodman ;evin %ollege of 2r#an (ffairs) %levelandState 2niversity) !arch 776 6.F auffman /oundation: Immigrants far outpaced native-#orn (mericans in entrepreneurialactivity last year. K3637?A G.F Dash#oard Indicators) /ederal eserve $ank-%leveland3/und for Cconomic /uture) G37?)immigrants have a high propensity to start new #usinesses and #e self-employedA they userelatively small amounts of pu#lic services and transfersA they do not generally causeunemployment among native citiHens) andL..immigrants are important contri#utors to therevitaliHation and economic development of many ur#an communities and neigh#orhoods. Theyaccount for much of the growth of minority small #usiness. Policy initiatives should address #usiness development needs of immigrant groups #y promoting educational and entrepreneurialtraining) providing assistance with #usiness development plans) language training) financialliteracy) and providing afforda#le housing near the concentration of ethnic #usinesses.


http://www.neweconomyinitiative.org/


http://www.neweconomyinitiative.org/



K.F National and local economists selected #y the /und for ur Cconomic /uture and <oices *%hoices found that competitive economies: Cncourage immigrants to settle in theregion. <oices and %hoices Summary) /e#ruary) 77?. ?.F ne of the //C/ partners) Nortech) has said that if we want to compete in the glo#al

economy we have to remem#er and re#uild our ties with the rest of the world) and encouragerather than discourage immigration to the region. Tech /utures Pro'ect) 77K. @.F Please also see: p-Cd) Immigrants %an evitaliHe the egion) 93K37?) Plain DealerA aswell as an article #y Silicon <alley guru) "uy awasaski) who spoke in %leveland. +ow%leveland can ick Silicon <alley,s $utt ?3?37?. f the 9 steps awasaki identified for%leveland to move forward) is Cncourage Immigration: I am a third-generation Bapanese(merican. !y family moved here to drive a ta1i and clean white people,s homes. If I had achoice #etween funding someone from a family who moved here from <ietnam whose father andmother run a @-Cleven versus a descendant of a !ayflower passenger with ,I<, in his name) I,llgive you half a guess as to my preference. 0ou need to encourage smart) hungry) and aggressive

people to immigrate from around the worldL.if you want to cover your ass) you need to openyour kimono #ecause trust-fund kids don,t make good entrepreneurs.

0our comments indicate a dichotomy #etween government and foundations. In reality)foundations are now filling the void left #y local government unwilling or una#le to dosignificant economic development. (t the same time) policy formation of these formerly pu#licactivities is done in a rather insular way. /or this reason to encourage open dialogue and participation across the community) please feel free to post your comments) and mine) on thewe# if you wish.

I do sincerely hope that we can continue and #uild upon this conversation of immigrantattraction) integration and economic development.

Sincerely)

ichard +ermanichard T. +erman * (ssociates) ;;%(ttorneys at ;aw98K Superior (ve) Suite 8E87%leveland) hio GG88G8?-?E?-?8@78?-?E?-787G fa1www.asklawyer.netwww.goglo#altrain.com

Providing Immigration %ounsel to "lo#al Talent * >orld-%lass %ompanies

http://www.asklawyer.net/

http://www.goglobaltrain.com/

http://www.asklawyer.net/

http://www.goglobaltrain.com/



On Fri, Oct 31, 2008 at :00 !, "cott "hane <[email protected]#> wrote:

Dear !r. /erman,

am emailing )o# in res+onse to )o#r comments on m) white +a+er.

wish )o# had written me directl) a$o#t it, rather than sent o#t a $roadcast email $eca#se )o#r email$adl) misinter+rets the white +a+er in two wa)s.

First, the white +a+er neer sa)s that the F#nd wo#ld ail to get a ret#rn rom an inestment in the+rograms that )o# sa) o++ose. n act, the +a+er e4+licitl) sa)s that the ret#rn wo#ld $e +ositie orman) o those +rograms. For instance, contrar) to )o#r inter+retation, the re+ort e4+licitl) sa)s that theret#rn to inestment in +rograms to enhance immigration wo#ld $e O"56 in terms o the creation oattractie entre+rene#rial ent#res. *hat is clearl) stated in the re+ort and shown in the +ower +ointslides is that +rograms to enhance immigration, to stim#late #niersit) and hos+ital research, andincrease the amo#nt o inentie actiit) in the region wo#ld 67/7(6 the amo#nt o attractieentre+rene#rshi+ in the region.

/oweer, the F#nd ased me to +rioriti9e +ossi$le interentions on the $asis o the magnit#de o theret#rns to inestments in them. t t#rns o#t that, while inestments to enco#rage immigration, stim#lateresearch, and increase inentie actiit), wo#ld generate +ositie ret#rns, other inestments, s#ch asthose to enco#rage the ormation o ent#re ca+ital irms, attract (-leel start-#+ talent, stim#late theormation o angel gro#+s, and increase the amo#nt o +re-seed grant mone) wo#ld hae higher ret#rns.he act that some things hae higher ret#rns to inestment in the creation o high growth ent#res sho#ldnot $e s#r+rising $eca#se the odds that eer)thing has an e#al ret#rn are er) low.

!oreoer, it is im+ortant to note that the re+ort e4+lains that seeral $eneicial interentions are $etters#ited or the goernment than or the F#nd. hose incl#de transitioning o#t o large scale man#act#ring,increasing the share o ind#str) in high technolog), increasing the n#m$er o college grad#ates and

increasing the +ool o management talent. gain, all o these things are ;OOD or stim#lating attractieentre+rene#rshi+. he) %#st are things that wo#ld $e $etter done $) the goernment $eca#se the scale o them is sim+l) too large or the F6F.

"econd, the white +a+er neer sa)s that those items identiied as haing a low ret#rn, or een no ret#rnat all, in enco#raging attractie entre+rene#rial actiit) are $ad and sho#ld not $e done. he) co#ld$e er) al#a$le in stim#lating other things that are desira$le hel+ing disadantaged gro#+s, increasing

mailto:[email protected]




em+lo)ment in the region, hel+ing to sae d)ing com+anies, and so on. For instance, c#tting ta4es iser) #nliel) to generate a lot o high growth new com+anies. /oweer, it ma) $e er) al#a$le to theregion $eca#se it will gie eer)one more cash to s+end.

/oweer, was onl) ased to e4+lain what creates more attractie new ent#res, not what wo#ld mae76O a $etter +lace. n#m$er o things descri$ed in the re+orts that )o# cite in )o#r email s#ch asim+roing amenities in the region or red#cing ta4es might mae 76O a $etter +lace. he) might, orinstance, enhance the growth o older, more esta$lished com+anies and create %o$s. !) re+ort doesn=tdisagree with that +osition. &ather, it doesn=t tal a$o#t that +osition $eca#se wasn=t ased to e4amine it. was onl) ased to loo at how to get more attractie new ent#res and to +rioriti9e those methods interms o &O.

am writing to )o# directl) rather than res+onding in the $logos+here $eca#se an) res+onse to )o#rcomments wo#ld re#ire me to sa) that )o# mis#nderstood the re+ort. did that, ear that at leastsome +eo+le wo#ld thin that )o# did misinter+ret what said, and hae no desire to +oint that o#t to the

world.

"o )o# might consider +ostingemailing a reinter+retation o m) white +a+er $ased on this inormation,and sae me rom haing to +ost these +oints in the $logos+here.

n short, don=t thin m) +osition is as ar rom )o#rs as )o# thin. &ather, thin )o# %#st missed thesco+e o the re+ort.

&egards,

Scott Shane

(. !alachi !i1on III Professor of Cntrepreneurial Studies

Department of Cconomics

>eatherhead "chool o !anagement

%ase *estern &esere ?niersit)

8888E $ellflower oad

%leveland, O/ 10A

Tel: 8?F 6?9-KK69



/a1: 8?F 6?9-K76E

email: scott.shaneOcase.edu

Think you know something a#out entrepreneurship4 Take the &uiH:http:33yalepress.yale.edu3yup#ooks3entrepreneurship&uiH.asp



http://yalepress.yale.edu/yupbooks/entrepreneurshipquiz.asp


http://yalepress.yale.edu/yupbooks/entrepreneurshipquiz.asp

Documents

Richard Herman's Response to Fund for Our Economic Future Research (Why It Believes Immigrant Entrepreneurship Is Not a Good Economic Development Investment)