It says growing numbers of skilled Asian immigrants in these high tech industries could open up the debate in the US on immigration policy.

The report - for the Public Policy Institute of California - says a quarter of Silicon Valley companies are now run by Chinese and Indian engineers. And the figure is rising.

While only 13% of the high tech companies founded between 1980 and 1984 had either Chinese or Indian heads, the figure has reached nearly 30% for start-ups between 1995 and 1998.

The software industry is booming in India

Immigration in California has been a prickly issue, the report says, with some locals complaining that their jobs are being taken by foreign workers. But the report argues that the companies set up by these workers actually create jobs.

Chinese and Indian companies in the Valley account for more than 58,000 jobs, and nearly $18bn yearly in sales. It says that restricting immigration therefore could have "more far-reaching consequences for economic development than most policy makers recognise".

The report adds that countries that complain about the "brain drain", involving their best skilled workers going to the United States, are also benefiting from the success of immigrants in California.

In what it calls the "brain circulation", the report says it cannot be assumed that such skilled workers actually stay in the US, with some returning to take advantage of opportunities back home.

It also adds that foreign-run businesses in Silicon Valley are increasingly linking up with firms in their home countries.

The report concludes that it is vital that Silicon Valley continues to both build and benefit from growing ties to the Asian economy.

Skilled immigrants

Historically, anti-immigrant moves in California have stemmed from a focus on low skilled labour. But that has now changed with the shift in emphasis onto a highly skilled immigrant labour force.

Increased migration coincided with growth of high tech industry

The number of professionals entering the US increased with a landmark bill being introduced.

The Immigration and Nationality Act of 1990 tripled the number of visas granted on the basis of occupational skill, and led to the large scale migration of engineers.

The increased numbers - many from India, China and Taiwan - coincided with the growth of high tech industries in Silicon Valley.

Immigrant entrepreneurs

The lack of managerial opportunities led several of the Asian engineering immigrants to start their own business - many in areas of new technology.

The entrepreneurs also mobilised collectively - forming ethnic based professional organisations such as the Silicon Valley Indian Professionals Association (SIPA) and The IndUS Entrepreneur (TiE).

The organisations served as a link between their home country and the US.

Using their historical links with their country of origin, the organisations have built ties between American business and Asian governments. They have also explored and established opportunities for themselves, such as in the booming software industry in Bangalore, south India.

As Silicon Valley's skilled Chinese and Indian immigrants create social and economic links to their home countries, the report says, they simultaneously open Asian markets to the broader business community in California.