Ethnic Innovation and U.S. Multinational Firm Activity

This paper studies the impact that ethnic innovators have on the global activities of U.S. …rms by analyzing detailed data on patent applications and on the operations of the foreign a¢ liates of U.S. multinational …rms. The results indicate that increases in the share of a …rm’s innovation performed by inventors of a particular ethnicity are associated with increases in the share of that …rm’s a¢ liate activity in countries related to that ethnicity. Ethnic innovators also appear to facilitate the disintegration of innovative activity across borders and to allow U.S. multinationals to form new a¢ liates abroad without the support of local joint venture partners. JEL Classi…cation: F23, J15, O31, O32, O33. Key Words: Foreign Direct Investment, Technology Transfer, Patents, Innovation, Research and Development, Ethnic Networks, Diasporas. Comments are appreciated and can be sent to ¤[email protected] and [email protected]. We are grateful to Olof Åslund, Lee Branstetter, Bruno Cassiman, Michael Clemens, Exequiel Hernandez, Sari Kerr, Joan Muysken, Hillel Rapoport, Jasjit Singh, Bill Zeile, and seminar participants at the AFD-World Bank International Migration and Development Conference, American Economic Association, Baruch Business School, Centre for Economic Policy Research Transnationality of Migrants Conference, Census Bureau, Cleveland Federal Reserve Board, Comparative Analysis of Enterprise [Micro] Data Conference, European Regional Science Association, Harvard University, International Workshop on Immigration and Economic Growth, MIT, National Bureau of Economic Research, Sloan Industry Studies, Sweden Conference on Immigration and Labor Market Integration, and University of Connecticut CIBER Conference for insightful comments. This research is supported by the Division of Research of the Harvard Business School. We thank Debbie Strumsky and Bill Lincoln for data assistance. Kerr is a Research Associate of the Bank of Finland and thanks the Bank for hosting him during a portion of this project. An earlier version of this paper was titled, "US Ethnic Scientists and Foreign Direct Investment Placement." The statistical analysis of …rm-level data on U.S. multinational enterprises was conducted at the Bureau of Economic Analysis, U.S. Department of Commerce, under arrangements that maintain legal con…dentiality arrangements. The views expressed herein are those of the authors and do not re‡ect the o¢ cial positions of the U.S. Department of Commerce.