New Study Examines How Stanford Alumni’s Entrepreneurship Rates Differ by Ethnicity and Nationality

New Study Examines How Stanford Alumni’s Entrepreneurship Rates Differ by Ethnicity and Nationality

Stanford University landscape with Memorial Church and the Main Quad at the center.

New Study Examines How Stanford Alumni’s Entrepreneurship Rates Differ by Ethnicity and Nationality, Finding Substantial Gap between Asian Americans and Non-American Asians

The role of Stanford University as a leading hub for innovation and the wide impact of the university’s entrepreneurship education and opportunities on Silicon Valley and beyond are well recognized. Less explored, however, is the question of how the entrepreneurship rates of Stanford alumni differ by ethnicity and nationality. In particular, how do Asian Americans and non-American Asians alumni compare in their entrepreneurship activities, and how do their entrepreneurship rates change with participation in university entrepreneurship education programs?

Yong Suk Lee, deputy director of the Korea Program at Shorenstein APARC and the SK Center Fellow at the Freeman Spogli Institute for International Studies, and Charles (Chuck) Eesley, associate professor and W.M. Keck Foundation faculty scholar in the Department of Management Science and Engineering, had the perfect data set to answer these questions. They analyzed a representative sample constructed from the Stanford Innovation Survey, a novel survey administered in 2011 to over 140,000 Stanford alumni—all living Stanford graduates since the 1930s. The survey asks about respondents’ entrepreneurship status and whether they were active investors, and provides rich information on alumni’s ethnicity and nationality, as well as on parental entrepreneurship. 

Lee and Eesley describe the results of their analysis in a new study, “the persistence of entrepreneurship and innovative immigrants,” published in Research Policy. This is the first journal article to use the Stanford Innovation Survey. Lee sat down with Noa Ronkin, APARC’s associate director for communications and external relations, to discuss the study’s findings and policy implications.

How did you get involved with this research project and with using the Stanford Innovation Survey?

I had already been studying entrepreneurship when I happened to meet Chuck Eesley, whose research focuses on the role of the institutional and university environment in technology entrepreneurship. I learned that Chuck had conducted the Stanford Innovation Survey and that he had not yet had the opportunity to dig fully into the data.

One question I had in mind was: What does entrepreneurship look like among Stanford alumni when you compare Asian Americans to non-American Asians, who were enrolled at Stanford as foreign students? The Stanford Innovation Survey provides an appropriate empirical framework for examining this question. That is how our research paper originated, and it turned out to be the beginning of a productive collaborative relationship between Chuck and me. We are now working together on a number of other projects as part of the Stanford Cyber Initiative.   

What does the Stanford Innovation Survey allow you to research that other data sets do not?

One substantial challenge in studying entrepreneurship is that there is little available information about young startups and their founders. In many cases researchers therefore look at ex post entrepreneurs, who constitute a highly select population that limits what you can study; it doesn’t allow you to examine the question of who becomes an entrepreneur. While this question isn’t new to the literature, the Stanford Innovation Survey allows us to offer empirical advances in addressing it.

First, our data set comprises a representative sample of alumni regardless of whether or not one became an entrepreneur. Second, the survey’s detailed data on alumni enables us to distinguish those from entrepreneurial families as well as examine immigrants and first-generation Americans of similar ethnicity. Third, the survey allows us to examine the relatively little-explored question of how the rate of entrepreneurship changes with participation in university entrepreneurship education programs.

Thanks to the survey’s detailed demographic data, we can compare the differences in entrepreneurship both across and within ethnicity and nationality. For example, we look at how intergenerational correlation of entrepreneurship—that is, the relationship between one’s choice to become an entrepreneur and his/her parental entrepreneurship experience—differs by nationality. This question speaks to how flexible a society is to increasing entrepreneurship and how rigid the job structures are in different societies.

What are your main findings?

First, we find that, among Stanford alumni, Asian Americans are quite entrepreneurial, even more so than white Americans (with 3.3% higher startup rate), but that Asians of foreign nationality are substantially less so (they have about 12% lower entrepreneurship rate than Asian Americans). Such discrepancy also holds for investing as an angel investor or venture capitalist, or utilizing Stanford networks to find funding sources or partners. So despite the similar cultural traits that Asian subgroups may share, the societal institutions one faces and one’s upbringing create a major gap in entrepreneurship rate.

In addition, we see that non-American Asians have lower participation rates in Stanford’s entrepreneurship education programs compared to their Asian American counterparts, and that participation in these programs does little to reduce the gap in entrepreneurship rate between Asian Americans and non-American Asians. We cannot draw from this any conclusion about the value of the university’s entrepreneurship education programs. All we can say is that mere exposure to them as a student doesn’t diminish the gap in entrepreneurship between Asian Americans and non-American Asians.

Finally, we find that parental entrepreneurship status is a strong predictor of one’s decision to become an entrepreneur; that parental entrepreneurship is lowest among Asians, especially non-American Asians; and that the degree of intergenerational persistence in entrepreneurship is substantially higher among non-American Asians compared with Asian Americans. The correlation between one’s entrepreneurship status and one’s parents’ entrepreneurship experience is particularly high for East Asians (e.g., Koreans and Chinese) compared to U.S. citizens, for whom it doesn’t differ by ethnicity.

Do your findings apply in any way to populations beyond Stanford alumni?

Clearly the sample of Stanford alumni isn’t representative of the general population, but results based on it may generalize to other samples of selective-admission college-educated alumni. Moreover, Stanford does play a significant role in entrepreneurship and innovation in Silicon Valley and beyond, and understanding entrepreneurship activity among students from a research university such as ours is critical to understanding high-growth entrepreneurship and how social environments influence entrepreneurs.

What are the policy implications of your study?

First, this study speaks to the need to develop a more nuanced discourse of immigration policy. Current discussions of immigration policy are often consumed by debates about low-skilled immigrants. Our findings suggest that high-skill immigration policy should be examined and evaluated separately from low-skill immigration policy. They also suggest that we should not just narrowly look at entrepreneurship and job creation by immigrant entrepreneurs, but also consider long-run effects. We see that young Asian immigrants who grow up in the United States are significantly more entrepreneurial than Asian foreign students, despite similar educational credentials. Allowing immigrants to settle in and attain the cultural and institutional features of the American education system at a young age could therefore positively influence entrepreneurship and innovation, at least among high-skilled populations.

Second, there may be lessons here for Asian countries that are pursuing various policies to promote entrepreneurship and innovation. The low levels of parental entrepreneurship and the high intergenerational persistence in entrepreneurship that we see among non-American Asians in our sample bring to relief the underlying socio-economic constraints on entrepreneurship in Asian countries. Sending their young people for education abroad with the goal of bringing them back home isn’t enough to break out from these constraints. A different approach is to develop policies that promote transnational bridging, encouraging high-skilled Asian Americans and emigrants that choose to remain here after education to engage with their home countries.