360° Analysis

Improved Immigration Laws Would Help Foreign Student Entrepreneurs Launch U.S. Companies, Create U.S. Jobs, Says Kauffman Pape


August 19, 2012 09:18 EDT

Legal, entrepreneurship experts at the University of Missouri-Kansas City propose reforms to keep entrepreneurial talent in the United States to support economic growth. 

By Barbara Pruitt and Anthony Luppino

U.S. colleges and universities nationally are seeing increasing numbers of international students with a passion for entrepreneurship, and many of those students want to start new ventures in the United States. However, current immigration laws make it difficult – if not impossible – for these budding innovators to establish startups while in school, or to remain in the country after graduation to grow their companies and create jobs that could bolster the U.S. economy.

In the paper "Reforming Immigration Law to Allow More Foreign Student Entrepreneurs to Launch Job-Creating Ventures in the United States," released today by the Ewing Marion Kauffman Foundation, a team of law and entrepreneurship experts from the University of Missouri—Kansas City (UMKC) outline specific measures to modify U.S. immigration law in an effort to attract and encourage talented international students to launch job-creating ventures in the United States.

"American colleges and universities are uniquely positioned to educate students on principles of entrepreneurship and innovation and give them opportunities to translate that knowledge into commercial ventures that create jobs and spur economic growth," said Anthony Luppino, UMKC School of Law professor and coauthor of the paper.

"However, various aspects of immigration law and visa administration often discourage, if not prevent, foreign student innovators from being founders of startup ventures during their course of study and from remaining in the country and operating job-generating businesses in the U.S. after they graduate."

"Immigration restrictions are an issue for several of the students in our program who are interested in pursuing a startup," said Rosibel Ochoa, executive director, William J. von Liebig Center for Entrepreneurism and Technology Advancement. "Right now we have students who cannot pursue their startups because their visas are expiring."

Luppino and coauthors John Norton and Malika Simmons, of the UMKC Institute for Entrepreneurship and Innovation and the UMKC School of Law, respectively, point to conditions in the laws that create barriers to entrepreneurial efforts. Regulations and interpretations pertaining to the F-1 student visa, for example, allow foreign students to work as employees or in internships with companies in their field of study, but appear to preclude them from being self-employed in a business venture – including active involvement in launching startups to gain real-world experience as part of an entrepreneurship program. Similarly, the process for obtaining an H-1B visa that foreign students might seek after graduating has been unfriendly to foreign entrepreneurs seeking to launch their own businesses.

Proposed legislation to address foreign student entrepreneurship issues, most recently the "Startup Act 2.0" (S. 3217) and its House counterpart (H.R. 1114), would create more opportunities for foreign graduate-level STEM (Science, Technology, Engineering, and Mathematics) students seeking to start new ventures here. However, the authors recommend that the Startup Act be altered to support the establishment of job-creating ventures in the United States by both undergraduate and graduate foreign students seeking degrees in any discipline and incorporating entrepreneurship in their studies and plans.

"We know that student entrepreneurial activity is a rapidly growing area and that immigrant entrepreneurs account for a disproportionate share of job creation," said Dane Stangler, Kauffman Foundation director of Research and Policy. "We could likely give a huge boost to entrepreneurship and, thus, the economy, by allowing international student innovators studying in all disciplines at all levels of higher education to launch and grow their companies in the United States."

The authors' proposed reforms include:

  • Allow students in an undergraduate or graduate degree program, in any discipline, to actively participate as an employee or owner in a "Qualifying Startup Student Venture" (determined by a higher education institution as having potential to generate a net profit and have at least two full-time employees in the United States within two years after launch).
  • Expand eligibility for the 17-month "Optional Practical Training" extension, currently granted only to students in the STEM disciplines, to include students who are actively involved as owners or employees of a qualifying business related to entrepreneurship study at a college or university.
  • Streamline the H-1B visa process for applicants who are principals in a startup business by eliminating or at least reducing what many observers have criticized as overly burdensome and impractical information requests and being more receptive to the proposition that a foreign entrepreneur can both own a controlling interest and work in a bona fide business under H-1B status.
  • Modify a section of the Immigration and Nationality Act to expand eligibility for the proposed new conditional immigrant visa ("Startup Visa") to include foreign holders of a bachelor's or higher degree from an institution of higher education who have founded and have an ownership interest in a "Qualifying Startup Student Venture" that has achieved either a minimum level of annual revenue of $50,000 or $100,000 capital investment, and has at least two non-family-member employees in the United States.

*As used in these proposals, “full-time employee” has the meaning used in Startup Act 2.0 (which defines the term as “a United States citizen or legal permanent resident who is paid by the new business entity registered by a qualified alien entrepreneur at a rate comparable to the median income of employees in the region”).

The views expressed in this article are the author's own and do not necessarily reflect Fair Observer’s editorial policy.

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