The Role of High-Skilled Foreign Labor in Startup Performance: Evidence from Two Natural Experiments
83 Pages Posted: 6 Oct 2019 Last revised: 1 Oct 2020
Date Written: September 28, 2020
We examine the role of high-skilled foreign labor in VC-backed startups through two natural experiments. First, we show that winning more H-1B visas in random lotteries enhances VC-backed startups' financial performance, likelihood of going public, and quantity and quality of innovation. Second, we show that the H-1B quota reduction in 2004 caused permanent damage to the performance of startups that previously had used H-1B workers. The findings imply that high-skilled foreign workers possess skills or talents that are difficult to replace and that barriers to securing H-1B visas lower startups’ innovation and financial performance.
Keywords: High-Skilled Foreign Labor, H-1B Visa, VC-Backed Companies, Innovation, Initial Public Offerings (IPOs)
JEL Classification: G24, G28, G32, G34, G38
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