Earlier this year I covered some interesting research looking at the influence of migration on the flow of investment.  The basic finding of the research was that diaspora are beneficial to their homeland because they encourage investment from their adopted land to their homeland by virtue of their knowledge of what might otherwise be an unfamiliar market.

It’s a finding replicated by a second study, from Vienna University of Economics and Business.  The research shows that knowledge about a market is a key determinant in the investment decisions managers make.

Immigrants often come with such comprehensive knowledge, including of the language, culture, political and economic systems and business practices of their homeland.  This can result in improvements in the knowledge and understanding of international markets within companies.

Indirect exposure

Interestingly, the researchers believe that these benefits can unfold even if the immigrants aren’t directly employed by the companies.  Instead, an indirect transfer of knowledge can occur simply by interacting with people in the host country, which leads to greater awareness of different markets and cultures.

“A firm located where immigrants move can use the immigrants’ knowledge to reduce barriers to the markets in the immigrants’ home countries. This, in turn, reduces a company’s uncertainty, which results in the country being more attractive to a firm seeking to establish operations abroad,” the researchers say.

They do believe that for this transfer to occur, however, two important factors need to be in place.  Firstly, the country of origin needs to have a stable political framework, and secondly, the host country needs to have favorable attitudes towards immigrants.

“The information provided by the immigrants can be negatively influenced by policy instability in their home country, because immigrants’ knowledge about their home country may no longer be accurate if the situation is unstable there. Furthermore, if anti-immigrant sentiment is prevalent in the host country, companies may be less likely to listen to the information and advice provided by immigrants,” the authors conclude.