Diaspora links with ‘home’ constitute an important source of social capital, contributing to what has been termed the Immigrant Effect (Chung and Enderwick, 2001). Studies have shown that companies owned by diasporas, or where they hold key decision-making positions, stimulate a greater level of trade between their country of origin and country of residency (Gould, 1994; Rauch and Trinidade 2002). Such companies also enable a higher level of commitment to resources and growth when entering a foreign market because they are more familiar with conditions in the target market (Chung 2014; Leung-Kwong Wong and Ellis 2002; Zhao and Hsu 2007). The Immigrant Effect speaks to the ability to engage with transnational networks that raised familiarity with local customers, government regulations and business practices ‘to reduce the psychic distance between home and target markets’ (Tung and Chung 2010, p. 375).
Regardless of the particular political and economic environments, regulatory regimes, or length of time engaged in international business, these studies show that diasporas benefit from their transnational social capital. It is advantageous in stimulating and expanding
business and trade between country of origin and country of residence. In a Chinese context, Tung and Chung (2010) found that while there may be no short-term gain in the long run it gives diaspora firms an advantage over non- diaspora firms in terms of profitability and sales growth (Tung and Chung 2010, p. 385).
In the context of SMEs, Collins (2002) observed that the family is a key resource for Chinese entrepreneurs. They draw employees primarily from family and community networks, with expectations of trustworthiness and heightened commitment to the business. Such personal networks are also important for start-up capital, offer an overall advantage of minimising transactions cost, and are crucial for trade flow, and business and market knowledge (Collins, 2002b).
In contrast, Voigt-Graf (Voigt-Graf, 2005) notes that the Australian Indian diaspora has made few formal economic links in terms of economic investment in India. There was some investment in the real estate sector in India (such as in Bangalore), as well as intentions to invest in the local economy. In comparison, a larger proportion of Americans of Indian descent have invested in Bangalore and are found to be taking greater advantage of the connections made in the transnational space than Australia’s
Indian diasporas. However, remittances from Australia to relatives in India were more likely than investments made in the formal, national economy. This connectivity propels or facilitates business activity, and the flow of finances for both trade and other family purposes.
This report’s findings align with insights offered by institutions such as Asialink and Diversity Council Australia, highlighting need to recognise and value Asian Australian leadership in the business arena in order to promote Australia’s business and innovation links with Asia. While there are some major differences between the ways in which Australia’s Chinese and Indian diasporas take advantage of the fast emerging transnational economic space, there is a growing recognition among these communities about the opportunities inherent in this space. Both diasporas are continuing to explore its potential, with every indication that economic exchange through their networks will increase in the future. Much will depend on a prevailing economic climate that is supportive, and the extent to which rules and regulations govern business collaboration and exchange. Free trade policies will clearly help but a commitment is also needed to overcome the more informal cultural and political barriers faced by the business diasporas. Box 2.4: Chinese students in the South Australian wine industry
Preliminary findings from an ongoing project by the Australian Population and Migration Research Centre at the University of Adelaide reveal how Chinese international students can play a crucial role for wine business seeking to penetrate the Chinese market. The study has found that while wine businesses are interested in starting, or increasing, export to China, many are unaware or unsure of how to engage with the Chinese market. This is a need that Chinese international students and graduates can meet.
For example, a medium-sized wine business located in the Adelaide Hills had very minimal engagement with China. An interview with its General Manager revealed that their business gained momentum largely due to employing a Chinese wine business post-graduate from mainland China who spoke fluent Mandarin:
… she basically started answering some of the few enquiries [we were getting from China] and translated [wine] tasting notes. After six months we actually appointed her permanently and it’s from that real point that we started generating sales in China …’cause we were easy to deal with, people could do business with us in their native language … we had to develop very quickly a strategy for China. She brought with her all this additional ‘bonus material’ which we weren’t looking for and essentially she created a job for herself.
As a result, China now accounts for 36 per cent (around A$2 million) of this particular wine business’ total revenue. Further, the study also found that the entrepreneurial spirit of international students should not be understated. Interviews with a number of Chinese international graduates from the University of Adelaide’s wine business programs found that their language skills, networks and business connections, and familiarity with both Australian and Chinese business cultures, allowed them to start-up their own businesses and navigate through a commonly perceived complex market to actively export large quantities of wine to China. For example, one Chinese student in the wine business program revealed how he acted as a bridgehead and assisted in the export of over 40 containers of wine to China during his time as a university student.