Immigrants, Colleges Drive Job Growth

WASHINGTON ( TheStreet) -- The Senate has spent much of the week with a $17.6 billion jobs bill, which offers tax incentives for firms that offer jobs to unemployed workers. But recent research suggests the best way to create new jobs is to create new companies by providing better support to immigrants and university labs.

"A relatively small number of high-growth firms account for a disproportionate number of jobs," says Dane Stangler, a senior analyst at the Kauffman Foundation, which funds research related to entrepreneurship. In his most recent study, Stangler found that fast-growing young businesses, generally those that are three to five years old, generate 10% of jobs in any given year, even though they comprise less than 1% of all companies. Kauffman refers to such companies as "gazelles." A prime example is eBay ( EBAY), which started out with one employee in 1995, had 620 by 1999 and has around 15,000 today.

"It might make sense, then, that policymakers casting worried glances at the unemployment projections might seek to somehow create more high-growth firms in the United States," the report states. While it's hard to predict which companies will go the way of eBay and which will go the way of Pets.com, the U.S. might have better luck creating high-growth firms if the country makes a point of nurturing two of the most common sources of such firms: immigrants and university labs.

A joint study from McGill University and the National Bureau of Economic Research finds that immigrants who entered the U.S. on temporary work visas or student/trainee visas tend to outperform native U.S. college grads in securing patents and starting successful companies, according to study author Jennifer Hunt.

The problem is that visas often don't last long enough for entrepreneurs to stick around the country and nurture their companies. To that end, the Senate is considering a bill by Democrat John Kerry and Republican Richard Lugar that would grant two-year visas to entrepreneurs who raise at least $250,000 in equity, with $100,000 coming from a venture capitalist or angel investor. Under the terms of the proposed bill, if entrepreneurs can create five new jobs (not counting immediate family members) and raise an additional million dollars during that two-year period, either in investment or revenue, the entrepreneur can become a permanent resident. Today, there isn't a visa geared toward entrepreneurs, though the U.S. offers a visa for foreign investors, the EB-5, which requires a business investment of at least $1 million and the creation of at least 10 jobs.

As for fostering start-ups from academic research, not every university has the resources of a powerhouse like the Massachusetts Institute of Technology, whose entrepreneurship center has launched companies such as A123 Systems ( AONE) and iRobot ( IRBT). Academia tends to be cloistered, and innovative lab work often doesn't get out of the lab.

"More universities are realizing they need to do a better job," Stangler says. He suggests a system in which university faculty members would be allowed to shop their discoveries around to technology transfer offices at other universities, rather than being confined to their own university. There isn't much collaboration among universities in that regard.

The government could encourage new business growth by decreasing the number of forms required to incorporate a new business in any state. Kauffman often polls entrepreneurs about their biggest headaches, and "one of the top two responses we get was, 'we didn't know there was going to be all this paperwork,'" Stangler says. "If you don't know that this burden is going to happen, it comes as a rude awakening. If you do, it can be a disincentive."

-- Reported by Carmen Nobel in Boston.