Abstract
This paper studies the impact that ethnic innovators have on the global activities of U.S. firms by analyzing detailed data on patent applications and on the operations of the foreign affiliates of U.S. multinational firms. The results indicate that increases in the share of a firm's innovation performed by inventors of a particular ethnicity are associated with increases in the share of that firm's affiliate 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 affiliates abroad without the support of local joint venture partners. This paper was accepted by Bruno Cassiman, business strategy.
Highlights
Over the last four decades, science and engineering communities in the United States have become considerably more diverse from an ethnic standpoint
To what extent do U.S based innovators of a particular ethnicity facilitate the expansion of U.S multinationals in countries associated with that ethnicity? Second, how do these ethnic innovators in‡uence the global distribution of the multinational’s research and development (R&D) and patenting activities? are U.S multinationals that employ innovators of a particular ethnicity less dependent on joint venture partners when forming new a¢ liates in countries associated with that ethnicity?
The ...rst presents analyses of the relation between the share of innovation performed by a particular ethnicity and the share of multinational a¢ liate activity that occurs in countries associated with that ethnicity
Summary
Over the last four decades, science and engineering communities in the United States have become considerably more diverse from an ethnic standpoint. Tests that analyze panel data of parent-ethnicity observations reveal that increases in the share of innovation performed by individuals of a certain ethnicity are associated with increases in the share of multinational a¢ liate activity in countries of that ethnicity These tests include parent-ethnicity ...xed e¤ects so that responses are measured o¤ of time series variation in the role played by innovators of a speci...c ethnicity at a speci...c ...rm, and they include a ...xed e¤ect for each ethnicity-year to control for trends in the growth of distinct ethnicities. The ...ndings in this paper suggest that U.S based ethnic innovators possess knowledge and connections that facilitate entry into foreign countries using organizational forms that leave larger ownership stakes in the hands of the multinational These ...ndings contribute to several literatures by illustrating the role that ...rms play in linking ethnic networks, foreign direct investment (FDI), and knowledge di¤usion. The second part describes the BEA data on the foreign operations of these ...rms and the merger of the two data sources
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