Immigrant effects and international business activity: an overview
| DOI | https://doi.org/10.1108/15587891111100778 |
| Published date | 18 January 2011 |
| Date | 18 January 2011 |
| Pages | 6-22 |
| Author | Peter Enderwick,Rosalie L. Tung,Henry F.L. Chung |
| Subject Matter | Strategy |
Immigrant effects and international
business activity: an overview
Peter Enderwick, Rosalie L. Tung and Henry F.L. Chung
Abstract
Purpose – This paper aims to examine the myriad linkages between cross-border migration and
international business activity through a conceptual framework of international arbitrage.
Design/methodology/approach – While labour is internationally the least integrated of the various
markets (capital, product, labour) the increasing co-movement of both tasks and workers has created
opportunities for the arbitrage and exploitation of differences between national labour markets. Because
national labour markets typically display the two characteristics of separation and price discrepancy it is
possible to utilise the principle of arbitrage and within this framework examine cost, intellectual,
knowledge and employment arbitrage.
Findings – The discussion suggests that international business offers valuable insights into migration
processes and effects which have been dominated by the researchapproaches of other disciplines. It is
found that migrants can help reduce transaction costs for bilateral trade, contribute to nostalgic trade,
encourage outsourcing and foreign direct investment through referrals and performance signalling,
assist country of origin development through remittances and return migration and provide valuable
knowledge to their employers in the country of residence.
Research limitations/implications – The paper is a conceptual one which offers no new empirical
results but does provide a context for the interpretation of the more specialised studies that appear in
this special issue. There is a need for research on this topic to be firmly grounded in the contemporary
context of an increasingly integrated global economy.It also suggests a number of specific areas where
further work would be useful.
Originality/value – The key contribution of the paper is in developing a comprehensive conceptual
framework – that of labour market arbitrage – which enables a clearer understanding of the complex
impacts of international migration on international business activity. It also distinguishes between direct
and indirect effects.
Keywords International business, Labour market, Immigration, Economic returns, Migrant workers
Paper type Conceptual paper
Introduction
This paper offers an overview of the various links between international migration and
international business activity. High levels of international migration, particularly skilled
migration to meet the labour market needs of developed countries, as well as remittance
flows, highlight the importance of this facet of the global economy. Although migration
impacts on a number of aspects of international business activity, the relationships have not
been well articulated or researched. While labour remains one of the least internationally
mobile factors of production, the linkages between national labour markets are growing as a
result of the entry into the world economy of major new producers and technological
developments which facilitate offshore outsourcing and the global fragmentation and
reintegration of value chains.
The co-movement of tasks and workers has created new opportunities for the arbitrage and
exploitation of differences between national labour markets. We build on this to overview
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VOL. 5 NO. 1 2011, pp. 6-22, QEmerald Group Publishing Limited, ISSN 1558-7894 DOI 10.1108/15587891111100778
Peter Enderwick is based at
Auckland University of
Technology, Auckland, New
Zealand. Rosalie L. Tung is
based at the Simon Fraser
University, Burnaby,
Canada. Henry F.L. Chung
is based at the Massey
University Albany Campus,
Auckland, New Zealand.
major components of international business – trade, outsourcing, foreign direct investment,
knowledge flows, employment, remittances and diaspora – and their links with migration
through a conceptual framework of cross-border arbitrage. Such arbitrage involves the
international transfer of knowledge, employment, intellectual capacity and trust and
reputation.
The paper is organised around five main sections. Following this short introduction we offer a
brief summary of the global significance of international migration. The second substantive
section considers the links between international migration and international business
activity. In the light of this, section four sets out a number of areas where future research is
needed, and in particular, areas where the discipline of international business could make
useful contributions. The final section presents concluding comments.
The global significance of international migration
According to the 2008 World Migration Report, there are an estimated 200 million
international migrants worldwide that account for roughly 3 percent of the world’spopulation
(Global estimates and trends, 2008). There has been an exponential growth in international
migration over recent decades, from 76 million in 1960 to 82 million in 1970 and around 190
million in 2005 (World Bank, 2006). International migration to high-income economies has
increased significantly and the share of migrants in the population of the wealthy countries
has doubled since 1970. Particularly important has been the number of skilled migrants
moving to the industrialised countries; emigration rates for skilled workers are more than five
times higher than those of low skilled workers (Docquier and Rapoport, 2004). In part this
growth has been fuelled by the emergence of new major source economies, in particular
China, India, the Philippines, Russia and the Ukraine as well as parts of Latin America.
Cross-border financial flows also reflect the growing importance of international migrants
within the labour markets of high-income economies. In 2008 around 190 million migrants
worldwide remitted more than US$305 billion to developing countries.
The wealthy destination countries are increasingly aware of the labour market benefits that
international migration can bring. Japan, Canada, the USA and many countries in Western
Europe face critical challenges of demographic ageing, shortages across a number of
occupations and increasing dependency ratios. A growing share of international migrants
within their populations could offer some remedy to these problems (Punch and Pearce,
2000). The foreign-born population accounted for almost 12 percent of the total population in
OECD countries in 2006. However, relianceon migrantworkers varies considerably between
countries. For economies such as Australia, New Zealand and Switzerland, migrants
accounted for as much as 25 percent of the employed workforce (OECD, 2008a). Many
international migrants are also highly qualified. In 2001, one quarter of all migrants in the
USA and Australia held tertiary qualifications. The comparable figures for New Zealand were
31 percent and for Canada, almost 38 percent (OECD, 2008a).
Geographical proximity is still a key feature of cross-border migration. Most Mexican
emigration is to the USA. More than half of all migrants from outside Europe, and in particular
from Asia, gravitated to non-European OECD economies. Interestingly,with the exception of
Australia, immigrants tend to earn less than the native-born. This may reflect the fact that
labour markets strongly value local qualifications and experience, perhaps as proxied by
years of residence (OECD, 2008a). This might explain the high propensity of many migrants
to choose self-employment: difficulties in accessing appropriate employment opportunities
may encourage them to start their own businesses (Logan et al., 2003; Portes et al., 2001).
The overall conclusion from this brief overview is that the labour markets of OECD
economies appear, in recent years, to have become more accessible to international
migrants, particularly the highly skilled. The Hudson Institute, a global think-tank, has
referred to this phenomenon as ‘‘global workforce 2000’ ’ that has been made possible by the
general reduction in immigration and emigration barriers to the movement of people
worldwide, the general ageing of the workforce in the industrialized West, and the rising
education levels in the developing countries have contributed to this growth in labour
mobility on a worldwide basis (Johnston, 1991).
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