Why Migration Is Important For Innovation To Thrive

Migration has been arguably the defining political topic of recent years, with those at various ends of the political spectrum arguing the rights and wrongs of their respective positions on the matter. While it is relatively common for these discussions to be frame in the context of security, identity or welfare, perhaps less common is for the discussion to revolve around innovation.

Yet research is increasingly clear on the impact migration has on the innovative capabilities of countries. In many senses this should come as no surprise. After all, the McKinsey Global Institute highlight that of the 247 million or so people who live outside the country of their birth, some 35% are highly skilled individuals with at least a tertiary level education.

These people then go on to have a big impact in their host country. A paper from the University of California San Diego School of Global Policy and Strategy highlights how attracting talent from overseas can have a big impact not only on the introduction of innovative new products, but also on the profitability of companies and even consumer wellbeing.

“We found companies with higher rates of H-1B workers increased product reallocation–the ability for companies to create new products and replace outdated ones, which in turn, grows revenue,” the authors say. “This discourse could have far reaching implications for U.S. policy, the profitability of firms, the welfare of workers, and the potential for innovation in the economy as a whole.”

Fresh ideas

The researchers collected the H-1B data that is filed by employers every time they recruit someone from overseas merged with data on that company from the Nielson Retail Scanner, which details all products produced by those companies. The dataset was compiled to allow the researchers to gauge the impact foreign workers had on the output of their new employer.

The study builds upon a large body of previous work that has attempted to explore the link between migration levels and patent output. There has also been considerable work done on migration and its impact upon wages and employment levels of native born workers, but they believe their work is among the first to explore the impact of innovation in a pure, new products and services sense.

They suggest that migration is beneficial for two core reasons. The first of these is that they are, as previously mentioned, generally highly skilled. When you combine this high education level with the fresh perspective they can bring from their homeland, it can lead itself to a fresh perspective being applied to old problems. Migrant workers can also often be recruited for lower wages than native born workers, which in turn means that employers can hire more of them. This weight of numbers can support the innovation process.

Carrying knowledge

A second study, from researchers at Harvard Business School, supported this general thesis. It explored migration through the lens of knowledge management, and specifically the way migrants bring knowledge from their homeland with them when migrate, and then combine this knowledge with locals in their host country to form new innovations.

“Knowledge that is locked in geographic regions doesn’t transfer globally instantaneously,” the authors explain. “It’s only when ethnic migrants who harbor this knowledge transfer that it moves from one geography to another.”

The transfer of knowledge tends to be a slow process as it’s far from certain whether the host country will be a welcome recipient of the foreign knowledge. What’s more, the new knowledge is often tacit and therefore difficult to codify such that others can build on it.

This was explored specifically with the pharmaceutical sector as changes in the H1-B visa limits impacted the number of scientists that could be recruited from China and India over the past few decades.

The analysis revealed that when the quota was increased, it corresponded with a 4.5% rise in the number of patents registered by companies who took advantage of this and recruited more from overseas. The power of recombining local and foreign knowledge became especially strong when migrants and natives collaborated together.

“Knowledge transfers through social networks,” the authors explain. “If a firm created mechanisms where the locals would work with migrants, then that knowledge would transfer and potentially be combined by the locals.”

Such flows of knowledge have also been found in academic circles, and it underlines the danger inherent in erecting walls that limit this flow of knowledge. While the digital age has promised the ‘death of distance’ for some time, we are still largely dependent upon face-to-face encounters to transmit the flow of ideas and knowledge, and innovation would be weakened if barriers existed to prevent that transmission.