Embedded diasporas: ethnic prejudice, transnational networks and foreign investment

Abstract

Ethnic diasporas are important actors in the global economy. Thanks to their transnational networks and cultural skills, migrants help to deepen economic ties between nations. Existing research, however, overlooks that diaspora communities are ethnic minorities embedded in potentially hostile social environments, as they often face social exclusion and discrimination. This article studies the economic implications of international migration by focusing on the relationship between migrant minorities and indigenous majorities. It argues that ethnic prejudice against entrepreneurial diasporas may constrain their ability to foster international economic integration, as it lowers public support for international flows. Empirical support for this hypothesis is found in a survey experiment leveraging on the case of Indonesia, a Muslim-majority society in which a small Chinese minority has long played a key role in domestic and international business. The findings have implications for research on migrant networks, international political economy and diaspora policy.