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Want To Expand Internationally? Hire Immigrants

Immigrants have an understanding of the language, economics, culture and business practises of their home country, that businesses can use.
Immigrants have an understanding of the language, economics, culture and business practises of their home country, that businesses can use.
  • Immigrants can provide unique knowledge about business practises
  • Knowledge about circumstances in target countries is key when expanding
  • Depends on political stability and immigrant sentiment of host country

“For generations, immigrants have fortified our most valuable competitive advantage – our spirit of innovation and entrepreneurship. Research suggests that ‘the total annual contribution of foreign-born workers is roughly $2 trillion.’ Key sectors of the US economy, from agriculture to technology, rely on immigration. Working age immigrants keep our economy growing, our communities thriving, and country moving forward.”

Those are the words of US President, Joe Biden. A refreshing view after the anti-immigrant sentiment Trump imposed over the last four years.

Professor Jonas Puck, from the Vienna University of Economics and Business echoes Biden’s point. Immigrants, he says, are key to economic growth, and argues that Trumps views of immigrants was negatively impacting the business practises in the US.

One of the most ambitious growth opportunities for every business is reaching out to international markets. Imagine, you have survived the first couple of years of starting up your business and now you want to expand. Successful leaders know that their companies need to expand in order to increase profits and reach new customers.

It is always an exciting opportunity to diversify their markets and move into entirely new areas. However, breaking into international markets is a tough road. Strained financial resources, economic and political instability, complex regulations and local circumstances are all factors that may hinder your company from expanding abroad.

Take a look at the US retailer, Target, they have had a proven track record of success with a reported growth of 20 percent in the third quarter last year, but they have struggled previously when it comes to expanding internationally, even as close to home as Canada.

In 2015, after less than two years, the company decided to end its expansion into the land of maple syrup, liquidating 133 stores, laying off more than 17,000 employees, and losing billions of dollars, after it was projected that it would take six years before they could see any profitability.

So, how can you ensure that when expanding your company, you won’t suffer the same fate? Well according to research by Professor Puck, it’s immigrants that are vital to helping your company to expand internationally.

The researchers, Professors Jonas Puck, Vera Kunczer and Thomas Liners say that this is because knowledge about circumstances in target countries is key in international investment decisions and reduces the amount of risk.

Their study reveals that taking advice from immigrants has a positive effect on outward foreign investment because, given the right circumstances, immigrants provide companies in their host country with key information about their home countries.

As a result, companies can improve their familiarity with international markets based on immigrants’ first-hand market knowledge, and social ties to their respective home countries, regardless of whether the immigrants are employed by the companies.

Immigrants can also contribute to a company’s knowledge indirectly through their interactions with other people living in their host country. This leads to knowledge flows between different markets that go beyond the mere employment of immigrants in the host country.

The likelihood of getting knowledge like this elsewhere is very slim. This is because immigrants have a comprehensive understanding of the language, economics, culture and business practises of their home country, which can help reduce any uncertainty and make it more appealing to invest there.

“A firm can use immigrants’ knowledge to reduce barriers to the markets in their 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,” says Professor Puck.

However, the effect of immigrants’ knowledge on the resources a company commits to operations internationally still depends on two key factors: the stability of the political framework in the country of origin, and the attitudes towards immigration in the host country.

“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,” says Professor Puck. “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.”

Unfortunately, anti-immigrant sentiment is all too common these days, just take a look at Trump or Brexit. Previous research has shown that anti-immigrant sentiment actually stems from financial crises because people see immigrants as an economic threat, when in reality it is the complete opposite.

Immigrants are beneficial in helping a business expand internationally because they have unique information about business practises in their home countries which can’t be found elsewhere. This in turn benefits both the economies in the home and host country.

Regarding immigration, Professor Puck said something that struck a chord with me; “Immigration can be a controversial topic to approach. Yet I think there is nothing wrong with talking about it. In my opinion, immigration brings together different nationalities and cultures, and fuels a country’s economy.”

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