In 2005, immigrant entrepreneurs launched 52% of all startups in Silicon Valley. But today, the number has dropped to 44%, and America is not only losing the opportunity to create new jobs but also losing its competitive edge, argues Vivek Wadhwa in his short, passionately argued book, The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent. Unlike during the 1980s, when skilled immigrants could get green cards (that let them become permanent residents of the U.S.) in as little as 18 months, today it can take as long as 17 years. Failure to fix this problem, says Wadhwa in an interview with Knowledge at Wharton, is killing American innovation and entrepreneurship.

An edited transcript of the interview appears below:

Knowledge at Wharton: Vivek, I wonder if you could tell our audience about your own immigrant experience and the role it played in shaping your research and your book.

Vivek Wadhwa: I was in New York in the 1960s as a child, and being in America is quite an experience. I left [the U.S.] in the late sixties, but I’d always wanted to come back. The first chance I got was in 1980, when my father got transferred to the consulate in New York City. I joined Xerox, and within a year and a half of coming here, I was able to get a green card. In my mind, the day I got my green card, I became an American. I started thinking like an American, behaving like an American, working like an American. There was no other country for me in the world. It was that easy.

A decade after coming here, I ended up founding my first company. The company grew to the point where it employed 1,000 people. We took it public, and it was a wonderful success. Then I started another company, which employed almost 250 people. I was able to do all this because it was so easy to become an American in the 1980s if you had the right skills. You can’t do that anymore, and that is a problem.

Now I teach at Duke, Stanford, Berkeley, Harvard and so on, and I hear the same horror stories from my students over and over again — that they want to stay [in America], but they can’t get a visa. Then others start talking about the fact that their friends have gone home, and that they’re doing really well back home. And they say, “We’d like to stay here to get a couple of years of experience.” They apply for jobs, but companies won’t hire them because they need H1B visas, and there aren’t H1B visas, or the companies don’t want to go through the negativity of being associated with H1B visas. It is lose-lose for the students and the companies. The result is that skilled people are leaving America in droves. If I had come here now, I would have been stuck in immigration limbo, like my students are. I would never have started a company. I would never have contributed to American competitiveness. I would never have been able to do anything with this great country if I was coming here today. That’s what the book is all about.

Knowledge at Wharton: So why do you think the experience of skilled immigrants today is so different than yours was?

Wadhwa: Because when I applied for my green card, there was no backlog, there was no delay in visa processing. I simply had to go through the labor certification process, which showed that I wasn’t taking away the job of an American, and then immediately I got my green card. The whole process was as easy as could be. Today, the problem is that, first of all, there are no H1B visas for people to come here and work for American companies. And then, once you start the process for a green card, there are no green cards available. The line for green cards is so long that if you’re Indian or Chinese, it takes decades.

What happens now is that you decide that you want to become a permanent resident, and your company files for you, and it takes five years, ten years, 15 years, sometimes 17 or 20 years while you’re just stuck in limbo, waiting for that green card. The problem is that, once you have started the process of a green card and you’ve done the labor certification, which means that you’ve now proven that you’re not taking away the job of an American, you’re stuck in that same job. You can’t change jobs. In those five, 10 or 15 years, you can’t go from being a program analyst to being a project manager. You can’t go from being a writer to an editor. You can’t change jobs; you’re stuck in the same grunt job that you had when you started the process, so people waste their lives in the same tedious jobs that they had before.

Knowledge at Wharton: One of the things you point out in your book is that skilled immigrants play a huge role in the U.S. economy. I wonder if you could please outline their contributions to job growth and intellectual capital formation.

Wadhwa: After I became an academic, one of the first research projects I did was to document the contribution of skilled immigrants. I had a hunch that there were many other people like me who were making a big contribution to U.S. competitiveness. The first thing I did was to look at all the research that had been done on the subject. I learned that AnnaLee Saxenian, who was then the dean of the School of Information at Berkeley, had documented that in the 1980s, a quarter of all the startups in Silicon Valley were founded by Indian and Chinese immigrants. It was amazing research. I contacted her, and I said, “Professor Saxenian, what’s the latest on this?” She said that her research was now a decade old and no one had updated it. Her belief was that the numbers had increased dramatically. A lot of anecdotal evidence indicated that immigrant entrepreneurship had increased quite significantly, but there was no up-to-date research. I said, “Would you like to work with me on this research?” And she said, “Absolutely, I’d love to work with you on it.” Then we spent several months revising her work — we used the same methodology, the same data sets, and updated the research.

We were both shocked at what we found — the trend that had started in Silicon Valley had become a nationwide phenomenon. From 1995 to 2005, a quarter of all the startups in America were founded by immigrants, by people like me…. And the proportion [in] Silicon Valley had increased to 52%. We also found that during the days of the greatest economic growth in recent U.S. history, the tech boom, 52% of the startups in America, the most innovative land in the world, were founded by immigrants. Fifty-two percent — that was just mind-blowing.

Knowledge at Wharton: Why and how did the immigrant startup machine begin to stall? What were the main reasons?

Wadhwa: Here’s what happened after we published our research. The research made headline news — it was featured everywhere. And then I started getting e-mails from all over the world. Now I’d become a guru on immigration. People started writing to me to tell me their problems. Even my students started talking to me about their problems. And I started to realize that there’s something wrong here, and that the new crop of immigrants is not able to do what I was able to do, which means join the workforce, become an American and become an entrepreneur when the time was right. They couldn’t do what I had been able to do. So I went back to Anna and I said, “Anna, what do you know about the backlog of immigrants?” And she didn’t know anything, so we teamed up with a professor from New York University, Guillermina Jasso, and we decided to now look into what had happened since the late 1990s, and [with] the backlog. Jasso was an ex-commissioner for the immigration department, and she tried getting data on the backlog. She couldn’t get it, so we decided to create our own methodology for estimating the backlog of immigrants waiting for green cards.

Again, we were stunned at what we learned — that there were one million skilled immigrants and their families waiting for green cards. As of October 26, I believe, in 2006, there were a million skilled immigrants in America waiting for a green card who were stuck in limbo. Everyone was talking about unskilled immigrants, the undocumented or illegal workers, as some segments of America call them. There was a lot of talk about the illegals, but no one was talking about the legal skilled immigrants who were stuck waiting for green cards. I looked at the data, interviewed many people, and I predicted that there would be a massive reverse brain drain of talent. We titled the paper, “Intellectual Property, the Immigration Backlog, and a Reverse Brain Drain.” The title “reverse brain drain” created a lot of controversy. My co-authors felt uncomfortable with it because it was such a radical title to use in an academic paper. But they knew there was a problem, so they agreed to leave it the way it was.

When we published that paper, it created a major controversy because other academics started scorning the concept of a reverse brain drain. In emails I received and discussions in academic groups, people said, “This is ridiculous. The U.S. has never had a brain drain. Brain drain is a European phenomenon. It’s an Indian phenomenon. It’s a Chinese phenomenon. It’s not an American thing. We don’t have brain drain in America.” Everyone laughed at it when that paper first came out. Today, no one doubts it. Almost every major publication has written about it. The Indian press, the Chinese press, the Brazilian press, everyone is talking about the reverse brain drain. It’s widely established that what we predicted is happening, that there’s a massive reverse brain drain of talent right now from the U.S. to other countries.

Knowledge at Wharton: The reverse brain drain is something we see very clearly on the UPenn campus. Ten or 15 years ago, Asian students at Penn usually wanted to stay for a few years in the U.S. to get work experience; these days, they are more inclined to head right back to Asia. I wonder if you could speak a little bit about what you think is driving the reverse brain drain and some of the forces that make it hard for skilled immigrants to stay on in America.

Wadhwa: Well, the first reason is that they can’t get visas. It’s that simple. When they apply for jobs, no one will hire them because there are no H1B visas available [for] many years. And then employers worry about all the paperwork and the political backlash. It’s very hard to get a job if you’re a foreign graduate of an American university. That’s number one. Number two, their friends who went back home are doing really well back there. They hear stories about going back and getting almost American salaries. Even if you don’t get American salaries, and you get a half or a third of what you make over here, you can have a very good lifestyle on that income in New Delhi or Bangalore or Pune or Shanghai. So they hear stories about how their friends have gone back and are doing very well.

And then the overall mindset has changed. When our generation came over here, it used to be that we came with one-way tickets. Our families back home expected they would never see us again. You may have heard one of the most popular songs in India was “Chitthi ayee hai” [A letter from the homeland] — most of the older Indian immigrants will relate to that. You heard all these sad stories about Indians who left the country and never came back and never saw their parents and their friends back home again. That used to be the norm. Now it isn’t. Now everyone talks to everyone back home; they realize how good things are over there, that you can have very good lifestyles in India and China and Brazil and so on. So the mindset has completely changed. You no longer have to stay in America to be successful.

Knowledge at Wharton: You referred to the first reason as being the visa system, the H1B system. Could you, from your perspective, explain what’s wrong with it? And how can it be fixed?

Wadhwa: The simple problem is that there aren’t enough visas. It’s that simple. There aren’t enough green cards available for the hundreds of thousands of people who are waiting for them. If we address that one situation, we’ll fix 80% of the problem. You’ll still have the problem of opportunity back home. But think of it this way — if you graduate from Duke or Wharton, and you join a top American company, you may think this is just temporary, and you tell your friends you’ll come back in two or three years. But then you end up falling in love with America. You’re doing well in your career. Why would you leave your job and go back to India when you’re doing very well over here? That is how two or three years become four or five years. In the meantime, if you’re a woman, you find a really nice looking guy, and you end up getting married. It happens the same way with the guys. You end up becoming an American and you never go back. So the reality is, if we just fix that one issue about the numbers of visas, the problem would likely fix itself. It’s that simple.

Knowledge at Wharton: What are the main barriers to that problem getting fixed?

Wadhwa: Politics, politics, politics. Before the election, we heard both Mitt Romney and Barack Obama in the debates talking about the importance of skilled immigrants. They agree on it. But they won’t pass legislation that fixes the problem. There was a STEM jobs act that was led by the Republicans a couple of months ago, which was defeated because the Democrats felt slighted that the Republicans didn’t talk to them properly to get their approval. And then the Republicans wanted to take the diversity visas away. It’s also the petty politics that get in the way. The Republicans don’t want to give the Democrats a victory. The Democrats don’t want to give the Republicans a victory. So like spoiled brats, like spoiled teenagers, these politicians are fighting one another. In the meantime, America bleeds. America bleeds competitiveness because our leaders are acting like juveniles.

Knowledge at Wharton: At the same time, as you point out in your book, there are other places in the world, like Chile, for example, that are actively trying to recruit global talent.

Do you think these efforts are succeeding? What do you think the U.S. should do to respond?

Wadhwa: You only have to go to Santiago to see the beehive of activity. Santiago is now associated with entrepreneurship. You go there to the Startup Chile offices, and you see dozens, you see actually hundreds of startups over there. You see the same type of activity you see in Silicon Valley — optimism, energy, excitement, innovation. They abound in Santiago because of America’s stupid policies. Now I have to do full disclosure over here. I helped design the Startup Chile Program, because Chile was looking for a way of boosting innovation. I said, “Look, the easiest way of fixing your problem of not having enough entrepreneurship and innovation in Chile is to take advantage of America’s stupidity. America is chasing away these skilled immigrants. Bring them here to Santiago and watch the magic that happens.”

Startup Chile is a huge success right now because Chile took a chance. They offered these entrepreneurs $40,000 to come there and just live for six months. The result is that they have a booming entrepreneurial ecosystem. America doesn’t have to bribe people. People want to come here anyway. People will give America money to come here. In fact, they’ll bring their life savings with them when they come here. They’ll bring tens of thousands of dollars of savings with them. And then they’ll get their friends back home and all of the world to invest hundreds of thousands of dollars in their startups … in America. We have it made right now, except we are being stupid.

Knowledge at Wharton: You offer seven fixes to help reverse the immigrant exodus. Could you take us through them?

Wadhwa: I’m going to simplify them a little bit. First, we need to increase the number of visas. That is the biggest hit over here. We need to have a startup visa, which means that [for] anyone in the world who wants to start a company over here, if they come here and the company employs X number of Americans over Y number of years, they become eligible for a green card. And then we need to fix the problems of the visas themselves. These H1B visas I talked about, they tie the worker to the employer. So it really is indentured servitude that the anti-immigrant groups rally against. These visas are defective. Right now, the employee should not be tied to the company. What should happen is that, if a company wants to sponsor a skilled worker, fine. The worker is tied to the company for one year or two years. But after that, they’re free to go to any employer that offers them a good salary. If we fix that visa, it would fix the imbalance, and it would fix the motivation of companies to take advantage of workers who are stuck in limbo.

And then there’s another problem with the H1B visa — that the spouses of the visa holders can’t work. Right now, women in Saudi Arabia have sometimes more rights than the spouses of H1B workers. It is really sad that in some states, they can’t get drivers’ licenses, which means they can’t drive, they can’t open bank accounts. Is this America? I mean this is ridiculous. These are some basic defects with the visas themselves. And then there aren’t enough visas available. Fix those, and you fix America. You fix America’s competitiveness.

There’s a lot more in my book. I brought it alive by showing stories of these skilled immigrants trapped in limbo, and discuss these issues in great depth. I encourage your viewers and readers to read the book.