Hiring H-1B Visa Holders Boosts A Company’s Products Overseas

New research finds hiring H-1B visa holders can improve a company’s existing products in foreign countries and lead to new products in export markets. The findings illustrate a benefit of employing individuals of different backgrounds. The research also may expose flaws in U.S. immigration laws premised on interchangeable workers without reference to unique advantages employers may garner when hiring individuals with business or cultural experience from particular countries.

“Our findings suggest that the human capital brought by immigrants gives firms greater capabilities to execute local adaptation strategies (i.e., greater responsiveness),” according to a study by economists Dany Bahar (Brown University and Harvard Growth Lab), Natalie A. Carlson (The Wharton School, UPENN) and Zeke Hernandez (The Wharton School, UPENN).

The economists focus on an area U.S. policymakers say is vital—increasing exports. A company’s long-term prospects often rely on successfully expanding into foreign markets. “But deciding where to launch products, how to tailor them to different foreign markets and how to respond to ongoing customer feedback is difficult,” the authors note.

The research concentrates on how foreign born hires at company headquarters, particularly in management roles, influence product choices abroad. The economists explain that the foreign born “have valuable knowledge and connections in their homelands due to personal, educational, and professional experiences” and that “such knowledge and connections help global product teams gain a deeper understanding of the myriad nuances required to launch or update products.”

Bahar, Carlson and Hernandez used U.S. Citizenship and Immigration Services data that included employer names and details of H-1B visa holders, including place of birth and occupation. They analyzed the H-1B data along with 72 “entirely novel products” and “approximately 173 repackaging launches.” The researchers took advantage of the randomness of H-1B lottery selection to improve the validity of the results, which covered from 2009 to 2019.

“We find that workers in R&D [research and development] roles have a particularly strong association with repackaging launches, beginning one year after hiring and strengthening with time,” according to the study. “This seems consistent with the importance of chemists, pharmacists, product designers, and related occupations in the reformulation of products and other aspects of product packaging related to changes in ingredients and product performance claims.”

Eighty-three percent of individuals with Ph.D.’s in computer and information sciences in the U.S. who perform R&D as a major work activity are foreign-born, according to a National Foundation for American Policy analysis. The proportion is also high for foreign born in other R&D fields.

The study found the foreign born are most likely to affect new product launches in their home countries when the geographic distance between headquarters and the other country is greatest. Foreign-born product and marketing managers and research scientists often are crucial hires.

“Our study provides valuable insights on the relationship between human capital at HQ and global strategy,” according to Bahar, Carlson and Hernandez. “More specifically, the full set of results is consistent with our main argument that immigrants provide country-specific knowledge and connections that influence MNCs’ [multinational companies] key decisions.” Those decisions include whether to launch new products and how to adapt and update products based on local conditions and market feedback.

“The study focuses on firms hiring through the H-1B category, through which it is increasingly harder for firms to hire the talent they need,” said Zeke Hernandez, author of the forthcoming book The Truth About Immigration: Why Successful Societies Welcome Newcomers. “How many companies are hurt in their ability to launch and properly tailor products for foreign markets because our visa programs don’t allow them to hire people with the proper know-how to do it right?”

“Our research has something important to say about the composition of teams in charge of global products for companies doing business in international markets,” according to Hernandez. “It’s critical to have people on the team who are from the countries in which the firm does business. Immigrant workers see opportunities in their home markets that others don’t see.”

U.S. immigration law for employment uses salary requirements or labor market tests that focus on whether foreign-born individuals will fill jobs U.S. workers or professionals could fill. The study by Bahar, Carlson and Hernandez shows those measurements may be misplaced when companies seek to expand in foreign markets since a foreign national may possess characteristics unique from a U.S. worker: “Natives of the foreign country who emigrate as adults have had sufficiently deep experiences in their homelands to possess two qualities useful for firms launching products abroad: knowledge and connections.”

“Diversity of national backgrounds isn’t just a vaguely defined moral good,” said Hernandez. “It’s essential for companies to craft good global strategies and stay on the cutting edge of a complex world.”