Either it shields the net benefit since immigration helps to lower trade barriers and increase cooperation.

Effect on firm outcomes across borders. Immigrants may play an even larger role for firm outcomes across borders. There is a well-documented strong positive relationship in the research literature going back several decades between immigrant diasporas and the trade, capital, and investment linkages with the countries of origin of these immigrant diasporas. For some recent examples (and of course, interested readers will want to check earlier studies cited in these works), Burchardi, Chaney, and Hassan (2019) find that the presence of historical diasporas in US counties leads to more foreign direct investment to and from those counties and the countries of origin of the diasporas, and Balachandran and Hernandez (2021) find that US venture capital firms become more likely to invest in India as their ties expand to Indian entrepreneurs in the United States. Hernandez (2014) further links the presence of immigrant diasporas to the success of foreign subsidiaries.

These immigrant diasporas increase cross-border investment success through three main channels. First, immigrants can reduce information frictions; in particular, because immigrants understand features of their home country such as market structure, consumer preferences, and business norms, they can identify business opportunities and alleviate many of the challenges inherent in cross-border trade and investment. Second, diasporas increase demand for “nostalgia” goods from the country of origin and in that way influence consumer preferences and tastes. Third, diasporas can provide social capital; for example, when courts do not work well, the social connections of immigrants and their knowledge of the local regime can decrease the costs of enforcing contracts.

Hiring skilled immigrants can also affect multinational firm cross-border success. For example, Foley and Kerr (2013) find that US-based ethnic inventor employees helped US multinational corporations to form new affiliates abroad without needing the support of a local venture capital partner. These ethnic inventors also were associated with an increase in multinational innovation, particularly in countries related to that ethnicity. As with the literature linking immigrants to trade and foreign direct investment, Foley and Kerr (2013) argue that the ability of these ethnic inventors to facilitate these changes is likely due to their knowledge and understanding of origin country customer demand, how to conduct business in that country, personal connections, and the trust that a shared language and culture facilitates.5 Kerr and Kerr (2018) extend this analysis to show US multinational corporations have more patents with cross-border teams—which account for much of the growth in global invention—when they have more US-based ethnic researcher employees. These papers suggest that skilled immigrants within multinational companies enhance the innovativeness and competitiveness of these firms abroad as well.