International Business | Diversity and Migration | Asia-Pacific

Trust Is a Hallmark of Immigrants’ Role in Cross-border Business

Fast Facts:

  • “Diasporas” – ethnic groups living outside their home countries – contribute greatly to business relationships between their country of residence and their country of origin.
  • A key to diasporas’ cross-border business contributions is the “trust” that ethnic or national communities help to foster.

The word “diaspora,” which comes from a Greek word meaning “a scattering or sowing of seeds,” refers to the spread of an ethnic group outside of their home country. The term was originally used to describe the Jews who were exiled from the historic land of Israel in biblical times. The first mention of a diaspora created as a result of exile is found in the Bible: “… thou shalt be a dispersion in all the kingdoms of the earth” (Deutronomy 28:25). 

Traditionally, members of an ethnic diaspora were considered to be victims: they had been displaced from their home country and had to live as aliens in a foreign land, which meant learning a new language and adapting to unfamiliar customs. Today, however, the fortunes of members of a diaspora are viewed more positively: in our globalized world, they can establish a dual presence in both their adopted country and their country of origin, and partake of opportunities and developments in both. 

Two of the largest and most prominent diasporas today are the Chinese and Indian diasporas. In almost every country in the world there are sizeable communities of people who have either immigrated from China or India, or are the second- or third-generation offspring of parents or grandparents who did so. SFU’s Rosalie Tung, the Ming and Stella Wong Professor of International Business at the Beedie School of Business, and Masud Chand, Associate Professor of International Business at Wichita State University, have extensively studied the Chinese and Indian diasporas, focusing on the contributions their members make to facilitating business relations between their countries of residence and their countries of origin. 

Members of diasporas are in a unique position to serve as “bridges” between their two countries because of their unique knowledge and ties in both. Tung and Chand point to several ways that they contribute to business involving their two countries:

  • Counteracting “brain drain.” Highly-skilled immigrants increasingly return to their home countries to apply their expertise and use their networks to take advantage of and create business opportunities – a process Tung and Chand call “brain circulation.”
  • Facilitating technology transfer. Diaspora entrepreneurs often return to their countries of origin to set up companies in IT and related fields.
  • Enhancing the national “brand.” Diasporas can influence the image people have of “Made in (country name)” by using and recommending high-quality products from their home country.
  • Promoting trade and investment. Immigrants provide information channels that can facilitate trade and investment by increasing understanding and reducing friction.
  • Providing cross-border networks. Through their social and/or business networks, the members of an ethnic diaspora can help entrepreneurs in their country of residence to set up or expand operations in their country of origin.

According to Tung and Chand, underlying diasporas’ contributions to cross-border business is “trust”: the belief that a person is credible and reliable. Diasporas are especially effective at fostering trust for three reasons. First, members of a diaspora can more easily develop networks within their country of origin because people, by nature, tend to form social ties with others who are similar to themselves. Second, ethnic professional associations such as the Silicon Valley Chinese Engineers Association and the Indus Entrepreneur mentor and provide contacts for recently-arrived immigrants, thus indirectly facilitating international trade and investment. Third, diaspora members who return to their home countries as entrepreneurs command respect from their ethnic kin because of their understanding of local practices and culture and their typically high educational achievements. 

While Tung and Chand focused on the Chinese and Indian diasporas, their research findings can be extended to other ethnic communities as well. The researches call for further research on how community trust within immigrant groups interacts with different government policies, and how this interaction drives (or hinders) trade and investment.