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One of the not-so-secret ingredients of Silicon Valley’s success is that the US has for decades been running a flourishing brain import business.
From Hungarian-born Andy Grove, the late chief executive of Intel who built the world’s biggest semiconductor company, to the Taiwanese-born Jensen Huang, the co-founder of Nvidia (which has now overtaken Intel), thousands of immigrants have driven and enriched the US tech industry.
Some 44 per cent of the 1,078 founders who created a US tech start-up valued at more than $1bn between 1997 and 2019 were born outside the country, according to a Stanford Graduate School of Business study. The top five grey matter exporters to the US were India, Israel, Canada, the UK and China.
To a lesser extent, the US tech sector has also been in the brain re-export business, sowing its magic beans around the world. Over the past decades, thousands of foreign-born researchers and entrepreneurs have returned home and have had a huge impact on developing the tech industries in their native countries.
Perhaps the most notorious returnee was Qian Xuesen, the Hangzhou-born Caltech professor who was deported from the US in 1955 during the anti-communist hysteria of the Red Scare. On returning to China, Qian masterminded the Dongfeng ballistic missile programme, becoming the “father of Chinese rocketry”.
In the 1980s, the Taiwanese poached the Chinese-born electrical engineer Morris Chang from the US to help develop the country’s semiconductor industry. Chang founded TSMC, which has become the world’s leading chip manufacturer.
This century, many thousands of Chinese-born researchers and entrepreneurs have been encouraged to return home armed with US credentials, contacts and start-up playbooks. One of the most successful of these sea turtles, as they are called, is Robin Li, co-founder of the multinational technology giant Baidu.
A similar pattern has been observable in India, albeit to a lesser degree. But, intriguingly, the success of these so-called boomerang entrepreneurs now appears to be falling short.
New research on 596 high-tech start-ups founded in India between 2016 and 2023 reveals that those created by purely domestic teams outperformed those launched by returnee entrepreneurs in terms of funding, valuation and revenue. “The results are largely unexpected,” the report’s four authors candidly conclude.
India’s homegrown heroes are now outpacing India’s prodigal sons, as the authors put it. The currency of time spent at Stanford University or Google in the US has been devalued.
The explanations for this reversal are not definitive. But the supposition is that it is because networks are increasingly digital, venture capital funding is now global and tech skills are more easily transferable.
India’s domestic tech ecosystem has now matured sufficiently to enable local founders, embedded in domestic markets, institutions and networks, to flourish without returnee expertise, write Vivek Wadhwa, AnnaLee Saxenian, DPK Muthukumaraswamy and MH Bala Subrahmanya. The liability of localness has flipped into the liability of foreignness.
The report’s findings are somewhat galling for Wadhwa for two reasons. First, they contradict some of his earlier research on the advantages of “brain circulation” he conducted as a US academic with Saxenian, a professor at the University of California, Berkeley. Second, the Delhi-born Wadhwa is himself a boomerang entrepreneur, having returned to India to build a biotech start-up, Vionix Biosciences.
“The locals do better than we do,” jokes Wadhwa. “When it comes to core entrepreneurship, the foreign advantage doesn’t exist.”
If these research findings are matched in other countries — and Wadhwa strongly suspects they would be — then this may have big implications for investors and policymakers around the world.
Most importantly, it means countries should do everything they can to retain their best homegrown entrepreneurs. This is especially true in India, which has the world’s largest diaspora of 35mn people, many of them boasting Stem qualifications.
The other big factor is clearly that the US has become a lot less welcoming to foreign workers. If the best foreign entrepreneurs conclude they are better off staying at home anyway, the exorbitant privilege of the US brain gain will fade.
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