Counteracting Globalization’s Skeptics: How Diasporas Influence the Internationalization Preferences of Minority Entrepreneurs’ Firms

Co-author(s): Todd M. Inouye (University of Hawaii at Hilo), Amol M. Joshi (Wake Forest University), Jeffrey A. Robinson (Rutgers University)

Published in Global Strategy Journal, 2020

Recommended citation: Inouye, T. M., Joshi, A. M., Hemmatian, I., & Robinson, J. A. (2020). "Counteracting Globalizations Skeptics: How Diasporas Influence the Internationalization Preferences of Minority Entrepreneurs Firms." Global Strategy Journal. 10.1: 123-173.

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Research Summary: We argue that the anti‐immigrant backlash sparked by globalization’s skeptics isolates U.S. minority entrepreneurs as outsiders, which constrains their domestic business opportunities. In response, these entrepreneurs leverage their shared ethnic identities as insiders within diaspora networks to pursue international expansion opportunities focused on their countries or regions of origin. We hypothesize that diasporas imprint minority entrepreneurs with risk preferences that reduce their skepticism about globalization, while increasing their caution about overcommitting resources. Analyzing over 20,000 U.S. small businesses, we find evidence that minority entrepreneurs’ firms prefer to leapfrog into markets, mitigate risks via contractual and bounded commitments, and target countries that are more ethnically and linguistically fractionalized. We extend internationalization process research with theory and evidence about how diasporas influence firm‐level strategic risk management decisions.

Managerial Summary: Increased skepticism about globalization is fueling an anti‐immigrant backlash in multi‐ethnic societies such as the U.S. This backlash may limit opportunities for immigrant entrepreneurs from ethnic minority communities to expand domestically, potentially motivating them to expand internationally. We investigate diaspora networks as a source of competitive advantage for minority entrepreneurs’ firms. We find evidence that diasporas positively influence minority entrepreneurs’ risk perceptions and attitudes toward globalization, leading their firms to prefer internationalizing faster, committing earlier, and targeting more fragmented markets than other firms. Diasporas counteract skepticism about globalization. We recommend that managers utilize diasporas’ access to resources, knowledge, and relationships to reduce their firms’ risks of internationalizing and that policymakers tailor government trade promotion programs to leverage diasporas to reduce transaction costs and increase exports.

Keywords: diaspora, ethnic minorities, globalization, internationalization, risk management