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Return Migration to Developing Countries

Working paper on the impact of return migration on entrepreneurial activity in developing countries

Natalia Grinberg

on 9 January 2013

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Transcript of Return Migration to Developing Countries

Natalia Grinberg Does Return Migration Promote Entrepreneurial Innovation in Developing Countries? Structure No significant correlation between return migration and innovation in developing countries (at least on a macro level)
Qualitative approaches suggest effects on micro level (individual actions)
Generally not a mass phenomenon with considerable effects Introduction
Literature Review
Capital Transfer
Business Establishments
Quantitative Analysis
References Risk and Entrepreneurship Seminar
11.01.2013 Introduction Sending
Country Receiving
Country Immigration Return Migration Are return migrants a source for innovative skills and ideas? Capital Transfer Human Capital Social Capital Financial Capital Business Establishment Constraints Innovation Quantitative
Analysis References Conclusions "New skills, ideas and attitudes" How is human capital gained (in theory)? Does that promote innovation? work experience
education (universities, professional training, ...)
exposure to innovative ideas and technology Empirical evidence suggests little, no or even a negative impact. Reasons:
mostly unskilled work (often deskilling)
knowledge does not get applied "[...] money, which [the return migrants] may transfer to the home country upon return" Pro: studies show that most businesses are set up with own financial means
no dependency on loans (less liquidity constraints) Con: money not invested in business activities ("conspicuous consumption") "Potential wealth that can be drawn from social relations" What provides social capital? business partners in sending and receiving countries
informants (investments opportunities, ...) Does that promote innovation? Pro:
opportunities for trade innovative products
staying up-to-date with international developments Con:
empirical evidence does not find these effects on a larger scale Administrative constraints
Too much competition
Not enough capital
Lack of experience
Management difficulties
Other difficulties 50.5 %
6.6% Number of investors 317 from Gubert/Nordman (2008), Table 12 How Schumpeter Defines Entrepreneurs "individuals who exploit market opportunity through technical and/or organizational innovation” Do developing countries benefit from that significantly? What kind of business is established differs from region to region
whole sale
retail trade
hotels/restaurants } small businesses
(<10 employees) small business owner ≠ entrepreneur Cases of innovative businesses established by return migrants only on an individual level
"new materials and new techniques for house building" in Cape Verde Is there a significant impact on a larger scale? Literature Review Source: own diagramm 1 Schumpeter (1949) 1 2 3 Hansson (2011) Gmelch (1980) King/Ammassari (2001) 2 3 4 King/Ammassari (2001) 5 6 King/Ammassari (2001) 6 7 Hansson (2011) 7 8 King/Ammassari (2001) Gubert/Nordman (2008) Gmelch (1987) McCormick/Wahba (2001) 8 9 10 11 9 10 11 12 Gubert/Nordman (2008) 14 14 Akesson (2011) Akesson, L. (2011), "Awkward Engagement? Development, Return and Entrepreneurship in Cape Verde". University of Gothenburg, Sweden. Ammassari, S. & King, R. (2001), "Harnessing the Potential of Migration and Return to Promote Development: Applying Concepts to West Africa". IOM Migration Research Series (5). Geneva: IOM. Gmelch, G. (1980): "Return Migration". Annual Review of Anthropology 9 (1980), S. 135-159. Gmelch, G. (1987), "Work, Innovation, and Investment: The Impact of Return Migrants in Barbados". Human Organization, Vol. 46, No. 2, 1987. Gubert, F. & Nordman, C.J. (2008), "Return Migration and Small Enterprise Development in the Maghreb", MIREM Analytical report, Florence, 2008. Hansson, M. (2011): "What New or Supplementary Answers can the Life Story Approach provide within the Field of Return Migration and Entrepreneurship? A Case Study of Ghanian Returnees". University of Stockholm. McCormick, B. & Wahba, J. (2002), "Return International Migration and Geographical Inequality: The Case of Egypt". University of Southampton, UK. Schumpeter, J. A. (1951). Economic Theory and Entrepreneurial History. Essays. Cambridge:MA, Addison-Wesley. New Product Line Upgraded Existing Product Line Introduced New Technology Opened New Plant Agreed to Joint Venture Obtained New Licensing Agreement Methodology Data Sources Enterprise Surveys (World Bank) [2002/2003]
US Census [2009]
World Bank Population Data [2009] Variables x-axis: Return migrants per 1000 residents
y-axis: Percentage of firms having taken that particular innovative action
(e.g. new product line) No significant (positive) correlation between return migration and enterpreneurial innovation (on a macro level) Literature: lots of different opinions depending on research approach
Own Analysis: lack of suitable data errors and biases Overall difficulties:
quantifying terms like "innovation"
gathering significant data n=25 "Developing Country"= HDI less than 0.75 Regressions 4 5 12
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