The role of high-skilled foreign labor in startup performance: Evidence from two natural experiments

Jun Chen; Shenje Hshieh; Feng Zhang

doi:10.1016/j.jfineco.2021.05.042

The role of high-skilled foreign labor in startup performance: Evidence from two natural experiments

Jun Chen, Shenje Hshieh, Feng Zhang^*

^*Corresponding author for this work

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

21 Citations (Scopus)

Abstract

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.

Original language	English
Pages (from-to)	430-452
Journal	Journal of Financial Economics
Volume	142
Issue number	1
Online published	31 May 2021
DOIs	https://doi.org/10.1016/j.jfineco.2021.05.042
Publication status	Published - Oct 2021

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 10 Reduced Inequalities

Research Keywords

H-1B visa
High-skilled foreign labor
Initial public offerings (IPOs)
Innovation
VC-backed companies

Policy Impact

Cited in Policy Documents

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10.1016/j.jfineco.2021.05.042

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title = "The role of high-skilled foreign labor in startup performance: Evidence from two natural experiments",

abstract = "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{\textquoteright} 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{\textquoteright} innovation and financial performance.",

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author = "Jun Chen and Shenje Hshieh and Feng Zhang",

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AU - Hshieh, Shenje

AU - Zhang, Feng

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N2 - 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.

AB - 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.

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KW - High-skilled foreign labor

KW - Initial public offerings (IPOs)

KW - Innovation

KW - VC-backed companies

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DO - 10.1016/j.jfineco.2021.05.042

M3 - RGC 21 - Publication in refereed journal

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JO - Journal of Financial Economics

JF - Journal of Financial Economics

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The role of high-skilled foreign labor in startup performance: Evidence from two natural experiments

Abstract

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Research Keywords

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