Migration and Innovation: How Foreign R&D Hires Shape Firm-Level Exploration in Their Host Country

Abstract

Prior research ascribes an important role to highly skilled immigrants in the production and diffusion of knowledge. However, little is known about their contributions to shaping the type and direction of organizational innovation. We aim to shed light on this question by investigating how newly hired foreign research and development (R&D) workers affect firm-level exploration. We argue that foreign R&D hires enable firms to overcome local search by making them aware of and providing access to novel knowledge tied to their home countries. We test this using a sample of 376 Danish R&D-active firms over the period from 2001 to 2013. Our findings reveal that newly hired foreign R&D workers contribute significantly more to exploration than other types of R&D workers within the firm. Moreover, we find support for the proposed mechanism and show that knowledge from the home countries of foreign hires shapes firms’ inventive output. Our results further suggest that the effect of foreign R&D hires is stronger for firms with a limited international search orientation and those with an incumbent R&D workforce with a shorter organizational tenure. These findings offer insights into a potential mechanism through which foreign R&D workers can shape firm-level exploration and the organizational contingencies that influence this relationship. Funding: The authors got financial funding from the Novo Nordisk Foundation in the course of the project “Investments, incentives, and the impact of Danish research (Triple-I-Research)” [Grant NNF16OC0021444]. Supplemental Material: The online appendices are available at https://doi.org/10.1287/orsc.2021.16073 .