What is the US Comparative Advantage in Entrepreneurship? Evidence from Israeli Migration to the United States
57 Pages Posted: 29 Apr 2019 Last revised: 3 Sep 2019
Date Written: April 22, 2019
This paper investigates the underlying sources of the US entrepreneurial ecosystem's comparative advantage by assessing the benefits Israeli technology startups derive from migrating to the US. To address positive sorting into migration we adopt three complementary approaches, which include examining exogenous institutional constraints on the startups' ability to migrate, estimating a double-LASSO regression, and estimating a startup fixed-effects model exploiting across migrant variation in migration age. We show that migrants raise larger funding amounts and are more likely both to apply for a trademark and to be acquired than non-migrants. Conditional on an acquisition, migrants also achieve a higher transaction value. However, they do not hold more patents than non-migrants. We conclude that the US entrepreneurial ecosystem’s comparative advantage vis-à-vis other innovative economies, such as Israel, arises from a multitude of sources that produce sizeable gains for startups. These sources are high investor availability, a large consumer market, and a developed market for acquisitions.
Keywords: Entrepreneurship, Entrepreneurial Ecosystem, Startups, Location Choices, Performance Outcomes
JEL Classification: F21, F22, L22, L23, L26, M13, O32, O34
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