Guest editorial

Citation

Chand, M. (2015), "Guest editorial", South Asian Journal of Global Business Research, Vol. 4 No. 2. https://doi.org/10.1108/SAJGBR-04-2015-0033

Guest editorial

Article Type: Guest editorial From: South Asian Journal of Global Business Research, Volume 4, Issue 2.

Special issue on South Asian diasporas

South Asian diasporas have been at the forefront of driving economic development in their countries of origin (COO), while simultaneously helping facilitate economic, social, and political ties between their COOs and countries of residence (COR). The eight countries that make up South Asia have some of the world's largest and most geographically dispersed diasporas. The Indian diaspora, estimated at about 25 million, is the world's second largest behind only the Chinese diaspora; however, the Pakistani diaspora, estimated at about seven million, the Bangladeshi diaspora, estimated at about six million, and the Sri Lankan diaspora, estimated at about three million, also form some of the largest diasporas in the world (Chand, 2013; Chowdhury, 2009; Eteraz, 2009; Ministry of Overseas Indian Affairs, 2012). While diasporas have existed for thousands of years, globalization, technological change, and increasing human and capital mobility have enhanced their importance and left them uniquely positioned to act as important facilitators of trade and investment between their COO and COR. Modern diasporas have played vital roles in facilitating trade and investments between their COO and COR, including direct activities such as sending remittances and investing in their COOs (Buckley et al., 2007; Geithner et al., 2005) as well as more indirect facilitation activities such as providing transnational social networks that serve as conduits for trade (Khanna, 2007; Saxenian, 2002; Chand, 2010), helping with institutional and human capital development in the COO (Saxenian, 2006), driving the "immigrant effect" (Chung and Tung, 2013; Chung et al., 2010), improving the image of the COO in the COR (Chand and Tung, 2011), introducing the culture of the COO in the COR (Chand, 2010), contributing to "soft power" for the COO (Chand and Tung, 2011), contributing to technology transfer and capacity development in the COO (Lin, 2010), and acting as channels for ideas and values transfers (social remittances) (Vaaler, 2011). An organized diaspora community, particularly when augmented by large numbers and organizational resources, can command considerable political capital in a COR, while simultaneously holding considerable influence in the COO. This makes them particularly useful assets for both the COO and the COR to leverage in the increasingly important global battle for talent.

The roles of South Asian diasporas are in a state of constant flux as the pressures of globalization coupled with the twin pulls of the homeland and the desire to integrate in the COR present them with unique sets of challenges. At the same time, these challenges may also lead to the existence of multiple opportunities - they tend to command a higher degree of trust in their COOs, their transnational social networks present opportunities for businesses in both the COO and CORs, their generally higher educated status allows to them to act as catalysts for knowledge transfer and institutional development, and they can act as ambassadors of the COO in the COR and vice versa. While COOs increasingly try to leverage them as assets, diasporas over time often become more integrated in the COR, leading to emerging questions of cross-national and intra-national identity. The rising level of diaspora return to their COO (especially among highly educated Indians in the West) and the increasing importance of brain circulation further magnify the importance of this topic in the twenty-first century.

The South Asian context is particularly important to scholars in international business and management. The population of South Asia, at about 1.6 billion people, makes it an important component of the global economy. This is coupled with the fact that the countries in the region have some of the fastest growing economies in the world. According to the World Bank (2014), the region's economy will expand by 6 percent in 2015. This is projected to increase to 6.4 percent in 2016. This rapid growth rate makes it the second fastest growing region in the world, after the East Asia and Pacific region. According to Martin Rama, Chief Economist for South Asia in the World Bank "The outlook over the next years for South Asia indicates broad economic stability and a pick-up in growth with potential risks concentrated on the fiscal and structural reform side. Future growth will increasingly depend on strong investment and export performance" (World Bank, 2014). Given the fact that diasporas from South Asia have been instrumental in providing conduits for trade and investment for the COO, studying them becomes an even more important issue.

In addition to the size and growth of the South Asian economies, another important feature is the relative youth of their populations. Whereas most of the Western world and the East Asian countries have rapidly aging population, South Asia has a fairly young population that is aging comparatively slowly (Khilji, 2012, 2013a). India, whose economy comprises more than 80 percent of the region's GDP, has more than 50 percent of its population below the age of 25 and more than 65 percent below the age of 35. It is expected that, in 2020, the average age of an Indian will be 29 years, compared to 37 for China and 48 for Japan (Basu, 2007).

Members of South Asian diasporas serve as boundary spanners between their COO and COR. While the ease and falling costs of communication and international transportation and the general lowering of trade barriers render cross-border transactions easier in the global environment, the diaspora's activities and role as potential brokers of transnational trust and knowledge generators can further facilitate trade and investment between the COO and COR. The tacit knowledge inherent in diaspora networks can in the long run provide a sustainable competitive advantage for both their COOs as well as their CORs.

We have assembled an important and interesting group of papers in this special issue. The papers cover a variety of topics, ranging from the characteristics of successful diaspora run enterprises, to the importance of immigrant entrepreneurs' social capital, to the role of sub-national regionalism within a country's diaspora affecting foreign direct investment (FDI) and immigration. However, all of the articles make the important point that the diaspora's success in the COR is largely dependent on their social networks, both within and outside the diaspora, and the way these networks are formed and used by the diaspora partly explain the how successful their enterprises will be. The studies also highlight the importance of ethnic professional associations in helping form and manage these networks.

The paper by Moghaddam (2015) helps to identify the individual and organizational characteristics of successful diaspora owned enterprises (DOE), thus playing an important role in filling the gap in literature about the performance of DOEs. This qualitative study based on interviews with eight Indian entrepreneurs underscores the dynamic relationship between the diaspora and DOEs by providing evidence that successful DOEs are not only influenced by their COO heritage and the diaspora community, but in turn also affect their COO and diaspora community through investment and community service. This study advances our understanding about diaspora startups by examining the similarities and differences across successful DOEs. A better understanding of successful DOEs can provide diaspora entrepreneurs with a list of best practices which may be different from those of successful indigenous entrepreneurs; therefore, diaspora entrepreneurs may choose to follow the startup techniques of successful DOEs rather than successful indigenous entrepreneurs.

The findings of this qualitative study also offer implications for immigrant individuals who might have interest in starting a new business. The findings suggest that there are strong similarities among all successful DOEs in the sample which includes having a college education and prior industry-related experience at the individual level as well as exhibiting an emphasis on market analysis and building the right team of employees at the organizational level.

The paper by Basu and Virick (2015) provides a deeper understanding of the factors that influence the growth of Indian-owned startups in the Silicon Valley. While most scholars agree that the remarkable growth of Indian-founded startups in Silicon Valley is attributable, at least in part, to the role played by co-ethnic diasporic networks in encouraging Indian entrepreneurs to support each other, the precise contribution of these networks to entrepreneurial growth remains incomplete, and this paper fill an important gap in the literature in this regard. This paper contributes to the emerging literature on foreign-born entrepreneurs in the US high-tech sector by exploring two main sets of questions. First, how is prior startup experience related to ethnic immigrant entrepreneurs' social capital, in the form of diasporic network participation, reliance on advisors, and working with co-founders? Second, how are ethnic immigrant entrepreneurs' diasporic network participation, advisor heterogeneity, and co-founder presence, related to new venture performance? These relationships were examined among 78 high-technology immigrant entrepreneurs from the Indian diaspora in Silicon Valley who were all members of The Indus Entrepreneurs (TiE), a professional association founded by the first generation of successful Indian technology entrepreneurs in Silicon Valley in 1992.

This paper provides evidence to answer questions about the relationship between prior firm-founding experience and social capital, and the relationship between social capital and business performance. The study finds that entrepreneurs with greater prior startup experience were more likely to work with co-founders rather than work alone. This supports Greve's (2006) argument that individuals need more human capital to utilize social capital. It is also consistent with information search theory that prior experience makes entrepreneurs more aware of the benefits of collaborating with others (Cooper et al., 1995). It is possible that their prior entrepreneurial experience helps serial entrepreneurs to build relationships with individuals they are comfortable to work with, and gives them the self-confidence to negotiate. Another interesting finding is that a greater heterogeneity of advisors does not have a significant impact on entrepreneurial performance or growth.

At a theoretical level, the results reported in this paper suggest that prior firm-founding experience is a valuable antecedent for new venture growth. However, contrary to entrepreneurial learning theories, the results also suggest that entrepreneurial knowledge and learning have an indirect, rather than a direct, effect on new venture performance, via greater participation in diasporic social networks. Thus serial entrepreneurs are more able and more willing to engage actively within their social network. Prior startup experience enables and encourages entrepreneurs to leverage their social networks to involve others in their new ventures. From a diaspora research perspective, deeper diasporic ties in large co-ethnic social networks, preferably global in reach, enhance the potential for new venture performance.

These results contribute to recent theoretical debates about the value of social capital for entrepreneurs in general, and more specifically, for ethnic immigrant entrepreneurs, and the value of bonding and bridging forms of social capital in entrepreneurship (Adler and Kwon, 2002; Gedajlovic et al., 2013). While current literature distinguishes between bonding (strong ties) and bridging (weak ties) forms of social capital, it could be argued that the distinction is more complex. Thus, intermediary global networks, such as TiE, which enable entrepreneurs to develop strong co-ethnic ties that cross-countries, functions, and industries, could be extremely valuable for entrepreneurial success. Intermediary global diasporic networks could act as bridges to bonds, enabling members to transform weak ties into stronger ties. Thus the importance of intermediary diasporic networks might be that they provide a web of bonding as well as bridging capital. At a practical level, aspiring entrepreneurs should not be afraid of starting new ventures, and trying again, even if their first venture fails, since the experience can be invaluable in accumulating social capital by developing social contacts. They should become members of ethnic or professional social networks, preferably those that cross-countries and industries. However, belonging to an ethnic or professional social network does not in itself facilitate entrepreneurial success: entrepreneurs must actively participate in the network over a length of time, if they wish to draw on its resources. In the context of ethnic immigrant and diaspora entrepreneurs, the findings suggest that entrepreneurs who participate more actively in diasporic global professional networks, and develop stronger ties within those networks, increase the chances of gaining competitive advantage and growing their new ventures. Entrepreneurs should consider becoming active members of associations that are global, and define their industry in broader terms to cross-narrow industry boundaries, since those associations are more likely to be valuable to entrepreneurial success. Venture capitalists and other investors would be better off investing in serial entrepreneurs who have greater startup experience, and in immigrant entrepreneurs who engage actively in diasporic global networks.

The paper by Chand (2015) looks at intra-national diversity within the Indian diaspora in Canada and the USA to find explanations for the pattern of emigration and reverse FDI. The paper used social network theories to investigate and explain the investment behavior of the Indian diaspora. It used a sample of a 158 diasporic Indian entrepreneurs and professionals from the USA and Canada, employing a mixed quantitative-qualitative study to investigate the phenomenon of the regional impact on emigration and reverse FDI to the COO. The first part was a quantitative study through a survey questionnaire targeting participants who were the most likely to drive the trade and investment relationship between the home and host countries. This would include managers and executives of MNCs, professionals with wide social networks in both home and host countries as well as entrepreneurs that engage in businesses internationally. In addition, a qualitative study was also conducted through in-depth interviews with 25 of the respondents. The interviews helped to gather more in-depth and comprehensive information about the reasons behind the respondents' choices.

One of the key findings was that Indians were more likely to invest in their home states. Over 80 percent of all investments by Indians had gone into their respective home states; if we consider that some of the "non-home state" investments had gone into other states that were recently created from dividing older states, this proportion jumps to almost 90 percent. This points to the important role that regionalism plays in the investment decisions of the diaspora. This is also in line with Zaheer et al.'s (2009) finding that the ethnic ties of founder CEOs, which are often regionally based, play an important role in their location choices. The study also tested the effects of the existence of social ties on the decision to migrate to the COR. The existence of family and friends, as well as an Indian community in the COR, seemed to be important factors in the decision to migrate. The findings reveal that the region of origin was important in the decision for reverse FDI, even though cognitively the participants did not recognize it to the same extent. This might point to a mediation effect, which should be investigated in future studies.

These findings could help businesses and governments understand the extent to which sub-national regional ties explain the investment motivations of people investing back in their home countries. Furthermore, the importance of regional ties in the decisions to invest point to the importance of studying sub-national cultural and institutional issues rather than treating large multicultural countries such as India as a monolithic bloc. For academics, this study reinforces the idea that there are significant regional differences in FDI patterns among immigrants from the same country. Researchers should take into account sub-national differences in their studies rather than treat countries (especially larger countries) as having identical cultures. It also supports the call by Ramamurti (2004) for international business scholars to pay more attention to topics that are not mainstream within the field but are of great importance to developing countries. For practitioners, the results of this study highlight the importance of not treating the diaspora as a monolithic bloc, but of taking into account the subtle regional variations that often affect the behavior of the diaspora. MNCs need to understand the regional social networks that their diasporic employees have can be used to expand into these regions more easily than in other parts of that country. In some cases, intra-regional variations could be as strong as intra-country variations. Potential employers and marketers can look to tap into this social capital of their employees and customers to further promote their products and services. These results can have implications for emerging economies as a whole, since throughout the region, formal institutions are relatively weak and people often rely on social networks to augment institutional voids.

As a group, all three papers emphasize the importance of social capital in the success of the diaspora and DOEs. Diaspora led professional organizations are one of the possible mediums that help provide this social capital, as well as valuable mentoring and institutional support. However, it is also important to note that the degree of benefit that individual diaspora members can derive from these organizations is directly proportional to their degree of active involvement in it. There is an inherent dynamism in the ties between the diaspora and a diaspora led organization - both affect each other while simultaneously being changed by them.

While this special issue covers important ground in the diaspora management literature, there is a great deal of future research that is needed in this field to further understand this important phenomenon and fully exploit the opportunities that the diaspora can provide for businesses and governments in the COO and COR. An important yet so far overlooked avenue of future research should be the sub-national regional dimension of diasporic ties. These regional ties have important implications for issues of trade, FDI, and immigration and merit further study. The roles of diaspora led professional organizations also deserve further study, not just in terms of the value they provide to the diaspora, but also in terms of the potential competitive advantage they can provide to MNCs that tap into these social networks. Case studies of diaspora organizations beyond the South Asian diaspora (e.g. the Silicon Valley Chinese Engineers Association) would help expand on this theme further. Another area of exploration would be the extent to which diaspora organizations help the diaspora across different cultures, and the ways in which these are similar and different. A further avenue of research could be to investigate some of the best practices in diaspora led businesses, and examine to what extent these could be transferred to non-diaspora businesses. For management scholars, it is important to keep studying the diaspora to understand better the emerging issues of brain circulation and reverse FDI, as well as to understand how diasporas can help create competitive advantage for MNCs that employ them. Because formal institutions in emerging market countries are often underdeveloped (Bruton et al., 2008), informal relationships and personal referrals are essential parts of business transactions and act as bridges to accessing international markets (Ellis and Pecotich, 2001). The transnational social networks that the diaspora possess can potentially be used to overcome these institutional voids that are prevalent in emerging economies. For scholars of the South Asian region, it is important to study the diaspora to understand their catalyzing effect on institutional development and knowledge transfer within the region.

At a higher level, both the COO and COR need to understand and realize the value of the diaspora's transnational social networks that help facilitate trade and investment through the transnational social ties. These networks, as previously noted, provide numerous benefits to both sides. In addition, if properly harnessed, diasporic networks can help facilitate mutually beneficial knowledge exchange between East and West (Khilji, 2013b). Ideas such as "frugal innovation," integrating the fluid, frugal "jugaad (roughly translated into 'simple innovative fix')" approach with the structured, process-oriented R&D model, and creating new models for doing business at the base of the pyramid, are emerging areas where a significant opportunity for mutually beneficial cooperation exists.

The increasing effort being made by South Asian governments to engage with their diasporas make it imperative that this process emerges and is seen as a win-win for all the parties concerned - the diaspora, the COO, and the COR. It is important to realize that trading and investing between the COO and COR is not a zero-sum game. The understanding of the different cultures and institutions involved on both sides can help create knowledge and commerce, and this in itself can help promote greater understanding, tolerance and peace between nations.

Assistant Professor Masud Chand

Wichita State University, Wichita, Kansas, USA

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About the Guest Editor

Masud Chand is an Associate Professor of International Business and a Tilford Fellow at the W. Frank Barton School of Business at the Wichita State University. His research interests include the role of diasporas in facilitating international trade and investment, immigrant entrepreneurship, biculturalism, and the effects of aging on global business. His work has been published in scholarly journals such as the Academy of Management Perspectives, Asia Pacific Journal of Management, Journal of Business Ethics, International Business Review, Asia Pacific Business Review, and Thunderbird International Business Review. Masud Chand can be contacted at: mailto:masud.chand@wichita.edu