Startups That Hire H-1B Workers Might Actually Do Better: Study

Can hiring H-1B workers make a startup more successful? That’s a conclusion reached in a paper by researchers from the University of Illinois at Urbana-Champaign and Nanyang Technological University in Singapore. (Hat tip to Quartz for the link to the paper.) The researchers concluded that, relative to other companies that applied for H-1B visas, “firms […]


Can hiring H-1B workers make a startup more successful?
That’s a conclusion reached in a paper by researchers from the University of
Illinois at Urbana-Champaign and Nanyang Technological University in Singapore.
(Hat
tip to Quartz
for the link to the paper.)

The researchers concluded
that, relative to other companies that applied for H-1B visas, “firms with higher lottery win rates are more likely to receive additional
venture capital funding and to have a successful exit via an IPO or
acquisition.” Startups with more H-1B workers also scored more patents, and
were referenced more often in patent citations.

The researchers’ sample pool included 1,866 for-profit startups that had undergone at least one round of external financing. Clearly, the paper’s authors equate H-1B workers with the sort of “high-skill labor” that means the difference between success and failure for a new, hungry startup.

“These
cohorts of random winners and losers provided the researchers a straightforward
way to examine how winning a visa in the H-1B lottery affects a startup’s
success irrespective of its business characteristics or the quality of its
potential hires,” is how Quartz summarized the researchers’ approach to
ensuring other factors aren’t necessarily responsible for the higher rates of
success or patents.

Any startup that wants to bring H-1B
workers aboard, however, must face a rising rate of application rejections by
U.S. Citizenship and Immigration Services (USCIS).

“In the
first three quarters of FY 2019, USCIS adjudicators denied 24 percent of H-1B
petitions for ‘initial’ employment and 12 percent of H-1B petitions for
‘continuing’ employment,” read a recent report (PDF) by the National Foundation for American
Policy (NFAP). “The 12
percent denial rate for continuing employment is also historically high—4 times
higher than the denial rate of only 3 percent for H-1B petitions for continuing
employment as recently as FY 2015.” (A brief note: ‘initial employment’ means
H-1B petitions for new employment, whereas ‘continuing employment’ is typically
an extension for an existing employee.)

Denial rates have also spiked at contractor and services firms that provide professional and IT services to other U.S. companies, including Accenture and Capgemini. In a statement to Mother Jones, a USCIS spokesman framed the agency’s reforms as “designed to protect U.S. workers, cut down on frivolous petitions, strengthen the transparency of employment-based visa programs, and improve the integrity of the immigration petition process.” Just check out this chart of overall tech firms, contractor firms, and rejections:

In other words, any startup that wants to land some specialized talent from overseas might have a harder time doing so. Fortunately, the domestic pipeline for highly specialized tech skills such as artificial intelligence (A.I.) and machine learning seems to be expanding a bit, as students realize that pursuing these specializations can prove quite lucrative.

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