Diaspora-owned firms and social responsibility

Benjamin A.T. Graham

Review of International Political Economy, 2014, vol. 21, issue 2, 432-466

Abstract: A causal relationship between diaspora populations and bilateral foreign direct investment has been established empirically, but the question of which elements of diaspora difference are responsible for this relationship, and what this implies for development, remains unanswered. A growing literature in economic sociology and business suggests that diaspora investors are motivated by patriotism and other social and emotional factors, endowing them with unique potential as a force for international development. This literature argues that diaspora-owned firms are more socially responsible than other foreign firms, and engage in a range of economic development-promoting behaviors when investing in the homeland: hiring more local labor, paying higher wages, and making more contributions to charity. I argue that diaspora-owned firms enjoy competitive advantages in the homeland based on access and attention to information. I evaluate these theories at the firm level, using data from an original survey of 174 foreign-owned firms in the post-conflict country of Georgia. Across a range of self-reported behaviors and priorities, I find no evidence that diaspora-owned firms are more likely to engage in a specific set of socially responsible, pro-development behaviors than are other foreign firms, and some evidence that they are less likely to do so. I argue that diaspora investors are uniquely capable, but not uniquely philanthropic, when doing business in their homelands.

Date: 2014
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DOI: 10.1080/09692290.2012.747103

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