Diaspora-affiliated firms that invest in the homeland are more successful than other foreign firms, but are equally socially irresponsible.
Once viewed as a “brain drain,” migrants are increasingly viewed as a resource for promoting economic development back in their home countries. In Investing in the Homeland, Benjamin Graham finds that diasporans—migrants and their descendants—play a critical role in linking foreign firms to social networks in developing countries, allowing firms to flourish even in challenging political environments most foreign investors shun.
Graham’s analysis draws on new data from face-to-face interviews with the managers of over 450 foreign firms operating in two developing countries: Georgia and the Philippines. Diaspora-owned and diaspora-managed firms are better connected than other foreign firms and they use social ties to resolve disputes and influence government policy. At the same time, Graham shows that diaspora-affiliated firms are no more socially responsible than their purely foreign peers—at root, they are profit-seeking enterprises, not development NGOs. Graham identifies implications for policymakers seeking to capture the development potential of diaspora investment and for managers of multinational firms who want to harness diasporans as a source of sustained competitive advantage.
Benjamin A.T. Graham is Assistant Professor of International Relations at the University of Southern California and cofounder of the Security and Political Economy Lab.
“In this important new book, Ben Graham adds to our understanding of global capital flows by focusing on immigration. Arguing that migrants have information about their homelands—about opportunities and potential constraints—Graham demonstrates how diaspora networks act as a conduit for financial capital in ways that traditional mechanisms fail.”
—David Leblang, University of Virginia
“This volume makes an important contribution to the study of foreign direct investment. It draws on several diverse strands of literature and sheds light on diaspora investment in terms of its behaviors and impact, which has been largely overlooked in the large-N empirical literature on FDI.”
—Quan Li, Texas A&M University