Brain circulation, diaspora, and international competitiveness

European Management Journal (2008) 26, 298– 304

journal homepage: www.elsevier.com/locate/emj

Brain circulation, diaspora, and international competitiveness Rosalie L. Tung The Ming & Stella Wong Professor of International Business, Simon Fraser University, Canada

KEYWORDS Brain circulation; Talent poaching; Ethnic diasporas; China; India; Immigration; Emigration; International competitiveness; Ex-host country nationals

Drawing upon findings of several studies, this paper examines the interrelationships between brain circulation or ‘‘triangular human talent flow’’, ethnic diasporas (specifically, the Chinese and Indian diasporas), and a country’s international competitiveness. Globalization, the lowering of immigration and emigration barriers to the movement of people, and the emerging concept of boundaryless careers have all contributed to the phenomenon of brain circulation. Brain circulation replaces the traditional concepts of brain drain versus brain gain because of the growing mobility of human talent across international boundaries. Implications, both theoretical and practical, are then discussed. Ó 2008 Elsevier Ltd. All rights reserved.

Summary

Introduction While labor has long been recognized as a factor of production in the annals of international trade, the pivotal role that human resources can play in a firm’s or country’s international competitiveness is only a relatively recent phenomenon. In the 1980s, at the height of the western world’s attempt to unravel the secrets of the Japanese economic miracle, Tung (1984) wrote a book entitled, Key to Japan’s Economic Strength: Human Power. In her book, she asserted that because Japan is virtually devoid of all natural resources, that country viewed that the surest path to economic growth and development is to harness and leverage its human capital. This explains, to a large extent at least, E-mail address: [email protected]

why Japan has committed tremendous energy and effort into developing its human resources. This investment apparently did pay off as Japan was transformed from its war-torn economy into a leading industrial powerhouse within the course of three short decades. Similarly, in his book entitled, Competitive Advantage: Creating and Sustaining Superior Performance (1985), Porter asserted that human resources span the entire value chain. Thus, human capital is considered essential to a firm’s ability to create and sustain international competitiveness. Along the same lines, Nonaka and Takeuchi (1995) argued that in a knowledge-based economy, innovation is critical to a company’s ability to attain and sustain its competitive advantage. Nonaka and Takeuchi identified two types of knowledge – explicit and tacit. Unlike explicit

0263-2373/$ - see front matter Ó 2008 Elsevier Ltd. All rights reserved. doi:10.1016/j.emj.2008.03.005

Brain circulation, diaspora, and international competitiveness knowledge that is usually articulated in mathematical formulae and manuals and, hence, readily accessible to others, tacit knowledge resides within people as it is learned or transmitted via experience and/or socialization. Viewed in this context, tacit knowledge becomes the property of individual employees rather than that of the organization. Consequently, if an employee who is rich in tacit knowledge decides to leave one firm and join another, that acquired knowledge will move along with the individual. This growing awareness that knowledge is power, and that this power is portable as highly-qualified employees move from organization to organization and across international boundaries has led to the theme of the 2006 World Economic Forum in Davos, Switzerland, the ‘‘War for Talent’’. In a knowledge-based economy, firms and nationstates are aware that in order to gain and/or maintain their international competitiveness, they need to seek, attract, recruit, and retain human talent wherever they could be found. Human talent is pivotal to the acquisition and generation of new knowledge that can ensure the organization’s survival in the Twenty-first century. Because highly-skilled human talent has become increasingly more globally mobile, nation-states may no longer have exclusive claim to people who were born, raised and/or educated within their national boundaries. More and more, nation-states have to compete with organizations in other countries for the same talent pool. Thus, human capital has become a key strategic resource and talent poaching (i.e., hiring away key personnel from one’s competitors) has become widespread. The much publicized legal suit filed by Microsoft against Google over the latter’s poaching of Dr. Kai-Fu Lee, a speech recognition expert, highlights the intense competition for talent among the two major technology giants. That suit has now been settled. This paper seeks to explore the relationships between the emerging phenomenon of brain circulation that arises from the global mobility of human talent, ethnic diaspora, and international competitiveness. The concepts of brain circulation and ethnic diaspora are explored and, where relevant, the findings of several studies will be presented to highlight the relationship between brain circulation and ethnic diasporas and how this can impact a firm’s or country’s international competitiveness.

Brain circulation In the past, there has been a tendency to talk about ‘‘brain gain’’ – whereby a country receives a healthy injection of human talent through immigration – and its converse situation, ‘‘brain drain’’. Increasingly though, it appears more appropriate to view such immigration and emigration patterns in the context of ‘‘triangular flow of human talent’’ and ‘‘brain circulation’’. Based on extensive studies of Hong Kong immigrants to Canada, DeVortez and Ma (2002) identified two major trends: one, after obtaining their advanced education and work experience in Canada, many Hong Kong immigrants chose to return to their country of origin (COO) to take advantage of better career opportunities and lower taxes there. Two, they found that Hong Kong immigrants who chose to return to Hong Kong were, in general, more highly-educated and wealthier. Taken together, these two

299 patterns suggest that Canada has become a human capital entrepot whereby people arrive, acquire competencies and skills that would be useful to them later in their career, and then leave. Devoretz and Ma found that the same pattern also applied to Indian immigrants to Canada. They characterized this situation as the ‘‘triangular flow of human talent’’ because what was once a brain drain from Hong Kong and India and hence Canada’s brain gain, has now been reversed as Canada suffers a brain loss through the outflow/return of immigrants to their COO. However, this brain loss on Canada’s part may not be permanent as many of these e ´migre ´s apparently cherish their Canadian passports and the quality of life in Canada and, hence, may yet return to Canada in the future. In fact, some Hong Kong immigrants to Canada maintain dual residences and businesses in both places and they have been dubbed in the Chinese press as ‘‘astronauts’’, i.e., people who shuttle back and forth between two distant hubs. Along the same lines, economic geographer, Saxenian in her book, The New Argonauts: Regional Advantage in a Global Economy (2006), likened the Chinese and Indian immigrants in Silicon Valley to Jason’s Argonauts in the Greek mythology who went to faraway lands in search of the golden fleece. In her studies, Saxenian tracked the journey of these high-tech immigrants who, after successfully establishing their IT operations in California, have decided to ply between the US and their COO to manage their businesses in disparate regions of the world to capitalize on the opportunities in both the US and their motherland. Viewed in this context, human capital circulates between the COO and adoptive country of these high technology immigrants, hence the concept of ‘‘brain circulation’’. This leads to a win–win situation for all as both the recipient and sending countries concurrently benefit from the same human talent pool. Saxenian noted that by the end 1990s, Chinese and Indian immigrants (with the former outnumbering the latter) accounted for 29% of all IT start-up companies in Silicon Valley. According to a study conducted in 2005 by Duke University and released in 2007, the percentage of immigrant start-ups in Silicon Valley has risen to 52%. During this same period of time, Indian immigrants have outpaced their Chinese counterparts in terms of new entrepreneurial startups. The Duke University study also found that for the state of California alone, immigrants accounted for 39% of all entrepreneurial operations (Kachru, 2007). Collectively, in 2005, companies that were either owned or established by immigrants employed 450,000 people and generated sales in excess of USD 52 billion. Brain circulation or triangular human talent flow has become possible because of several important developments: One, globalization – the growing economic interdependence has meant that countries around the world are more inter-connected than at any other previous time in history; two, the reduction in immigration and emigration barriers to the movement of people, thus making it easier for people to relocate across countries; three, a growing number of countries, including the US, Canada and many European Union countries permit dual citizenship, thus facilitating this mobility across nations; and four, the emergence of the concept of boundaryless careers where highly qualified people are increasingly willing to change jobs across

300 international boundaries in search of more intrinsically satisfying careers (Tung, 1998; Stahl et al., 2002). Because many first-generation immigrants still have strong ties with their COO, as evidenced by their desire to establish business linkages between their current country of residency (COR) and their motherland, it is important to examine the interplay between brain circulation and ethnic diasporas.

Diaspora ‘‘Diaspora’’ is derived from the Greek word meaning ‘‘a scattering or sowing of seeds’’ and refers to the spread of a given ethnic group outside of their COO (http://en.wikipedia.org/wiki/Diaspora). The term, diaspora, was traditionally used to describe the Jewish population exiled from Judea in biblical times and from British Palestine before the formation of the modern nation-state, Israel. According to Wikipedia.org, there are an estimated 6.15 million Jews living in the US, and another 800,000 and 600,000 Jews in Russia and France, respectively. The size of the Jewish diaspora is dwarfed, in comparison, by the two largest ethnic diasporas in the world, namely that of the Chinese and the Indians or South Asians. Since Chinese and Indian immigrants to both the US and Canada are, in general, more highly educated and wealthier than the general populations in these respective countries, they have also been referred to as the ‘‘knowledge diaspora’’ (Welch and Zhen, 2007). Coincidentally, these are also the ethnic groups that account for the majority of IT start-ups in Silicon Valley as discussed in the preceding section of the paper. The Chinese diaspora is estimated at between 52 and 60 million. The vast majority of these live in southeast Asia where they control a disproportionate amount of the domestic economy of these countries. According to Chua (2004), while ethnic Chinese account for 1 and 3 percent, respectively, of the populations in the Philippines and Indonesia, they control 60–70% of the respective wealth of these countries. In the case of North America, which is home to many members of the Chinese diaspora outside of South-east Asia, ethnic Chinese accounted for 3.37 and 1.6 million, respectively, of the total populations in the US and Canada. It is important to note, however, that since Canada’s population (33.39 million as of July 2007) is just slightly over one-tenth that of the US (301 million for the same time period), there is a higher Chinese presence, percentage-wise, in Canada as compared to the US. In the case of the Indian diaspora, according to the Indian External Affairs Ministry, there are an estimated 20 million Indians living outside of India as of 2005. According to the US Census Bureau (2006) and Statistics Canada (2001), there were an estimated 2.3 million and 713,000 ethnic Indians living in the US and Canada, respectively. Again, similar to the situation for the Chinese, there is a higher percentage of Indians living in Canada as compared to the US. Furthermore, despite the fact that the populations of both China and India are fairly close, size-wise (1.321 billion for China vis-a `-vis 1.129 billion for India), the Indian diaspora is considerably smaller than that of its Chinese counterpart. Aside from their roles in entrepreneurial/IT start-ups in Silicon Valley that was discussed earlier, both the Chinese

R.L. Tung and Indian diasporas share other common characteristics as they relate to the phenomena of brain circulation and international competitiveness. These include: (a) their heavy representation in US graduate degree programs in science and engineering; (b) their affinity to their motherland; (c) the growing economic might of their COO; and (d) various attempts by governments of their COO to attract members of their ethnic diaspora to return to contribute to economic development at home. Each of these characteristics is briefly examined below.

Strong representation in US graduate degree programs in science and engineering In 1966, 78% of all earned doctorates in science and engineering in the US were awarded to local-born Americans. The ability to produce a critical mass of graduates in these disciplines is essential to sustaining a country’s competitiveness in a knowledge-based economy. Over time, the percentage of doctorates accorded to local-born Americans in these disciplines has declined, so much so that by 2000, only 61% of such degrees were bestowed upon people in this category. In the same year, the top countries/economies of origin of foreign students in science and engineering programs in the US were the People’s Republic of China, the Republic of Korea, Taiwan, India and Canada. To date, the vast majority of foreign-born graduates in these disciplines have chosen to remain and work in the US, i.e., the stay rate in the US is high. For example, in 1998 and 2003, 61% and 70% of Chinese graduates in science/engineering and computer science, respectively, chose to remain in the US (Johnson, 2001). While these statistics bode well for the US at the present time, in light of the growing career opportunities posed by the rise of the Chinese economy and the strong ties that many Chinese have toward their ancestral land, in the event that these US-educated Chinese decide to leave the US, it can have disastrous consequences on the US’s ability to sustain its leadership in the areas of science and technology.

Affinity to their motherland There is a popular saying among the Chinese that ‘‘all Chinese under the heavens belong to one family’’. Thus, many overseas Chinese continue to identify themselves as Chinese or hyphenated Chinese, such as Chinese-Americans or Chinese-Canadians. Regardless of whether they have living relatives in China or not, many Chinese continue to harbor lingering emotional ties to their ancestral homeland. These strong emotional bonds serve as a powerful motivator for ‘‘transnational entrepreneurship’’ and the ‘‘new Argonauts’’ phenomenon alluded to by Saxenian in an earlier section. In a study by Tung and Chung (2007) of 394 Australian and New Zealand small- and medium-sized enterprises, they examined the role of ‘‘immigrant effect’’ in the choice of destination of outward investment and mode of foreign market entry. ‘‘Immigrant effect’’ (IE) refers to companies that were owned/founded by immigrants and/or which hired immigrants in key decision making positions. Tung and Chung found that: one, the IE existed in investments to both industrialized and developing economies. That is,

Brain circulation, diaspora, and international competitiveness Australian and New Zealand firms whose owners/founders or who hired immigrants from Greater China (China proper, Hong Kong and Taiwan) were more likely to invest there, while the same was true for firms with IE from the European Union. Two, where IE was present, the firm tended to adopt a higher commitment entry mode, i.e., used FDI as opposed to exporting because of greater knowledge of the target market. This study on IE supports the transnational entrepreneurship activity reported by Saxenian (2006) among high-tech immigrants from the Silicon Valley. This phenomenon has received much attention from the governments of COO of these high-tech e ´migre ´s. In 1980, the Taiwanese government, for example, established the Hsinchu Science Industrial Park south of the capital city, Taipei, to provide a hub for high-technology development in that economy. Over 370 companies, primarily in the semiconductor, computer, telecommunication, and optoelectronics industries, have established operations in that industrial park. Most of these companies were founded by Taiwanese Chinese who were educated and worked in the IT sector in the US and other advanced countries. (http:// en.wikipedia.org/wiki/Hsinchu_Science_Park). These include Macronix Co., and VLSI Technology. Similarly, Chinese from the Mainland who have returned to China after receiving their education and work experience in the US and other industrialized countries are active players in the Zhongguancun Science Park in Beijing and Zhangjian High Tech Park in Shanghai. These include Charles Zhang, founder of Sohu.com, and Wu Ying of UT Starcom. Sohu.com is a US NASDAQ-listed Chinese company that introduced ‘‘the first Chinese-language search engine in the world and (is) a leading internet portal in China’’ (Tung, 2004). UT Starcom is a Chinese-based global leader in the ‘‘manufacture, integration and support of IP-based, endto-end networking and telecommunications solutions’’ (http://www.utstar.com/). In the case of India, many foreign-educated Indians who have acquired extensive work experience abroad have contributed to Bangalore’s reputation as the ‘‘Silicon Valley of India’’. For example, Sabeer Bhatiya, founder of hotmail.com, received his M.Sc. in electrical engineering from Stanford University and worked for a while in the US before launching hotmail.com. After selling hotmail.com to Microsoft, Bhatiya moved on to other ventures, including plans to develop a new city, Nanocity, in India that will hopefully ‘‘replicate the vibrance and eco-system of innovation found in the Silicon Valley’’ (http://en.wikipedia.org/wiki/Sabeer_Bhatia). Close ethnic identity could also be an important determinant in an individual’s choice of friends and spouse. A 2007 survey by BBC showed that 44% of Indians living in the United Kingdom would only marry those from the same race vis-a `-vis 9% for the White respondents, although the reverse situation was true when friendship patterns were concerned – only 31% of the Indians said that all or most of their friends were of the same race as opposed to 69% for the White respondents (BBC Survey, 2007). This greater tendency for Indians to form friendships outside their own race may stem from necessity as they are still an ethnic minority in the United Kingdom. Aside from the strong affinity to their motherland as a whole, ancestral village or regionalism also has an overriding influence on choice of exact location for actual invest-

301 ment. The Chinese place a lot of emphasis on ancestral village – when two Chinese first meet, they usually exchange information about their ancestral village even though the person may never have visited that place. Ancestral village refers to the place where one’s forefathers came from many, many generations ago. People from the same ancestral village feel a special closeness because of the general belief that in ancient times, people from the same village all belonged to one family. This strong regionalism serves to account for the fact that the bulk of Taiwanese investment in China is in Fujian province in south-eastern China, the ancestral home of many of the present-day Chinese inhabitants in Taiwan. The same is true for Hong Kong Chinese whose preferred investment destination is Guangdong province in southern China. In India, where there are marked religious and language differences across regions, this regionalism is perhaps even stronger than that in China. In an ongoing study by Tung and Chand (2007) on the role of the diaspora in facilitating bilateral trade between US and Canada, on the one hand, and India, on the other, tentative findings suggest that 100% of investments from Indo-Americans or Indo-Canadians into India are bound for their home states. For example, many Sikh e ´migre ´s have settled in the province of British Columbia in Canada. Sikhs are followers of the religion known as Sikhism. Thus when Sikhs from Canada and the US invest in India, their preferred destination is Punjab in north-eastern India. Benet-Martinez and Harritatos (2005) have developed a bicultural identity index (BII) which gauges the extent to which hyphenated Americans, such as Chinese-Americans, identify with their COO and adoptive country, the US. Those who scored high on BII (i.e., those who identify themselves both as Chinese and as Americans) feel that it is compatible to enjoy the fruits of both culture and tended to draw on the best values and traditions in both cultures. Conversely, those who scored low on BII tend to experience conflict and tension as they believe that being loyal to their COO implies disloyalty to their adoptive country, or vice-versa. In the ongoing study by Tung and Chand (2007) alluded to earlier, preliminary findings suggest that Indo-Canadians tend to score higher on BII than Indo-Americans. This may stem from the very different approaches adopted by Canada and the US toward cultural diversity – Canada has an official policy of multiculturalism where ethnic groups are encouraged to cherish and exhibit their cultural traditions; whereas the US favors a ‘‘melting pot’’ approach. Interestingly enough, however, tentative findings suggest that BII is negatively correlated with desire to invest in COO. That is, Indo-Canadians, who were in general higher on BII, were less likely to initiate trade and investment in India, as compared to Indo-Americans, who were lower on BII, as a whole. This preliminary finding is not surprising though as those who are high on BII identify equally as well with their COO and their adoptive country. Therefore, from their standpoint, Canada is truly home. This relationship has yet to be explored further, however.

Growing economic might of China and India In 2005, Business Week coined the term, ‘‘Chindia’’, to refer to the growing economic might of the two most populous

302 nations of the world, China and India. China has experienced the fastest rate of economic growth in the world since the early 1990s, and every year since 2002 that country has been ranked by A.T. Kearney’s Foreign Investor Confidence Index as the most attractive destination of foreign direct investment (FDI), despite lingering concerns among the foreign investment community about its apparent lack of transparency and somewhat checkered record in the protection of intellectual property. Similarly, India has enjoyed rapid rates of economic growth in recent years, and in 2006, it overtook the US to become the second most attractive destination of FDI in the A.T. Kearney ranking. Both China and India maintained their numbers 1 and 2 rankings, respectively, in 2007. The annual rankings of A.T. Kearney Foreign Investor Confidence Index are compiled from a survey of CEOs and CFOs from around the world. The rapid rates of economic growth enjoyed by these countries in the recent past and the tremendous prospects for continued expansion in the years ahead translate into exciting opportunities, both career- and financial-wise for members of these two diasporas. Given their strong affinity with their COO, as discussed earlier, and their desire to partake in and/or contribute to the continued economic growth of their ancestral homeland, have meant that many overseas Chinese and Indians are attracted to return, either on a temporary or permanent basis, and/or establish transnational business linkages to China and India, respectively. To date, China has been more successful than India in attracting FDI from its diaspora – an estimated USD 360 billion of investments were made by overseas Chinese in China between the years 1980 and 2004 vis-a `-vis USD 2 billion of investments by overseas Indians to India over the same time period (Geithner et al., 2004).

Attempts by Chinese and Indian governments to attract members of their ethnic diaspora to return As overseas Chinese and Indians ponder over the option of returning to their respective COOs, the Chinese and Indian governments have been busy sending strong welcome messages to lure members of their ethnic diaspora home. China does not recognize dual nationality which, in itself, can be a disincentive in terms of attracting ethnic Chinese to return. However, the Chinese government has embarked on initiatives and policies to facilitate their return, even on a temporary basis. In 1991, China enacted the Protection Law on Returned Overseas Chinese and Overseas Chinese Relatives which guaranteed, among other things, that all returned overseas Chinese (ROC) ‘‘have all the rights of a citizen provided by the Constitution and the laws’’, all profits from legally-generated businesses established by the ROC will enjoy ‘‘preferential treatment for taxation’’, and overseas remittances of the ROC will be protected and can be freely converted back into foreign currencies at any time (http://qwb.sh.gov.cn/shqb/english/laws/userobject1ai1251. html). In 2003, Chinese President Hu Jintao issued an impassioned plea to overseas Chinese students to return and contribute to the development in their motherland. According to the ‘‘Report on the Development of Chinese Talent in 2006’’, released by the Chinese Academy of Sciences in 2007, an estimated 1.06 million Chinese went

R.L. Tung abroad to study between 1978 and 2006. Of this, only 30% returned. In the area of science and engineering, the disciplines most needed in China’s current efforts to become a leading industrial nation, the stay rate abroad of Chinese students is even more dismal – an estimated 90% of Chinese graduates in these disciplines have remained in the US. This figure is higher than the statistics reported by the US National Science Foundation referred to earlier (Johnson, 2001). The report cited the following reasons for the high stay-rate abroad: higher incomes earned abroad; more job opportunities; nicer working conditions; higher standards of living and better quality of life; and stronger R&D facilities abroad. In the words of the Chinese Academy of Sciences, this is the worst ‘‘brain drain’’ in the world (Li, 2007). These reasons for the decision to remain abroad cited in this report are fairly consistent with the ones uncovered in Tung (2006) and Tung (2007). This brain drain could worsen in the future since only 4000 of the 118,500 Chinese who went abroad to study in 2005 were funded by the government. Throughout the 1980s and up to the mid-1990s, the vast majority of Chinese students who went abroad were funded by the government. Under such funding arrangements, there was an obligation for the recipients of such scholarships to return. The 2005 statistics suggest that self-financing is now the norm; as such, there is no obligation on their part to return to China. Furthermore, because many Chinese returnees have acquired foreign citizenship, as noted above, should conditions deteriorate in China, they may choose to leave again. There is preliminary evidence to suggest that the Chinese government should be concerned about this possible development. According to Antal and Wang (2003), based on data collected in 2001, of the 90,000 who had returned by March of that year, about one-half had left again. This supports the concept of brain circulation discussed earlier. India, in contrast, has passed a dual citizenship law in December 2003, whereby overseas citizens of India are designated as ‘‘non-resident Indians’’ (NRI). As NRI, they can enjoy the same privileges as domestic citizens of India with the exception that they cannot draw upon that country’s social welfare benefits. In general, the protection extended to NRI is analogous to the ones the Chinese government has accorded to ROC. Also in 2003, the Indian government organized the first conference in New Delhi to assemble NRI and ‘‘People of Indian Origin’’ (PIO). This conference was attended by over 250 delegates from 32 countries. Unfortunately, comparable data on the number of NRI who have returned and their stay rates in India are not available.

War for talent Using the example of the US and China alone, the above suggests that both countries are, to a large extent, tapping upon the same talent pool for their international competitiveness. Hence, the looming ‘‘war for talent’’. This competition will likely intensify in the years ahead for several reasons: from the US standpoint, according to the US Bureau of Labor Statistics, there will be a shortfall of ten million workers in the US by 2010 (Manpower White Paper, 2007). In their 2006 survey entitled, Workplace Forecast, the Society for Human Resource Management predicted a ‘‘shortage of qualified candidates in positions that require degrees in science, tech-

Brain circulation, diaspora, and international competitiveness nology, engineering and mathematics’’ (Schramm, 2006). As noted above, the US currently relies heavily on the decisions of many foreign-born US-educated science and engineering graduates to remain in that country. However, given the growing boundaryless nature of human talent and the concerted efforts made by governments of the COO of many of the e ´migre ´s, there is cause for concern in the US. From the Chinese perspective, even though it is the most populous country in the world, it has a major shortfall in managerial talent. In 2005, Farrell and Grant (2005) at McKinsey noted that China will need 75,000 executives with international experience, whereas the country only had 5000. This led them to characterize the situation in China as the ‘‘shortage among plenty’’. This heavy demand for managerial talent comes from two major fronts: One, from foreign-invested enterprises (FIEs) in China – as noted earlier, since 2002, China has been the most attractive destination for FDI from around the world. Furthermore, many of these FIEs have chosen to locate their R&D facilities in China. According to UNCTAD (2005), China is the top choice for R&D expansion, ahead of the US and India. Two, China’s ‘‘go global’’ policy whereby the government seeks to develop 20–25 world-class multinational companies, or national champions, by 2010. Perhaps the most visible symbol of China’s outward FDI activities is Lenovo’s purchase of the IBM’s PC division (Luo and Tung, 2007; Liu, 2008). In her studies of Chinese and non-Chinese students in Canada, Tung (2007) found that: one, many Chinese students in business administration, engineering and computer science are willing to return to work in China, although none of them wanted to work for a Chinese company. Most preferred to work for FIEs or set up their own companies. This finding is consistent with the World HR Lab Report of over 3000 Chinese students overseas (2004) and Tung (2006). Two, many non-Chinese students in Canada were willing to work for Chinese companies in North America, but less so for Chinese companies in China. Three, most Chinese students wanted to work in Shanghai and Beijing, the most developed cities in China. This finding is again consistent with the World HR Lab Report (2004) and Tung (2006). This finding highlights a potential concern, namely that the gap between the developed and less developed regions within China could widen rather than decrease as the Chinese government has hoped for. In a study of ex-host country nationals (EHCNs) (or returnees) to Central and East European (CEE) countries, all of whom were recipients of the Soros Foundation scholarship and hence were required to work for a period of time in their respective home countries to fulfill the terms of that scholarship, Tung and Larazova (2006) found that EHCNs of CEE countries that were high on the human development index (HDI) were more likely to remain in their home country after fulfilling the return requirement of the Soros scholarship. In contrast, many EHCNs of CEE countries that ranked medium on the HDI indicated that they planned to leave their COO after they have satisfied the return requirement. None of the respondents in Tung and Lazarova study came from countries that ranked low on HDI. Thus, this finding also suggests that the greater likelihood of EHCNs to remain in the more developed countries/regions can exacerbate the gap between the ‘‘have’s’’ (more developed) and ‘‘have-not’s’’ (less developed) countries or regions. These findings have tremendous implica-

303 tions for a country/region’s ability to compete for talent and, ultimately, its competitiveness.

Conclusion and discussions Using the examples of the US, Canada, China and India, this paper has examined the burgeoning concepts of brain circulation, diaspora, war for talent, and international competitiveness. The studies drawn upon to highlight the interrelationships among these concepts strongly suggest that the shortage of human talent can create the most significant challenge (or bottleneck) to a country’s ability to attain and sustain international competitiveness. This is particularly important in the case of emerging economies, such as China and India, which are aware of the potential contributions that members of their ethnic diaspora can make to facilitate economic growth and development at home. Given the high level of education attained by many overseas Chinese and Indians, they are also referred to as the ‘‘knowledge diaspora’’. The challenge for these emerging economies is how to entice members of this knowledge diaspora to (a) return, either on a temporary or permanent basis; and/or (b) use the COO of these e ´migre ´s as a major hub of their transnational entrepreneurial activities. For industrialized economies, such as the US, while they are currently benefitting from these high-tech immigrants, the question is can they count on being on the winning side of this ‘‘war for talent’’ indefinitely? Do they have contingency plans in the event that the situation should change, i.e., as there is an exodus of high-tech e ´migre ´s to their COO? In terms of theoretical implications, the concepts introduced in this study and their related findings suggest that what constitutes home versus host country is no longer as clear-cut as it used to be. For example, in the past, there were fairly clear distinctions between what constituted an expatriate and a host country national, and what was brain drain vis-a `-vis brain gain. As this paper has shown, these concepts have become more blurred. This has major implications for cross-cultural research – for example, in a study of work values, should EHCNs be considered as a member of the host country, home country, or do they fall into a separate category completely? In the area of international human resource management, for example, existing paradigms on staffing/selection, training and development, compensation and performance appraisal are better suited for the traditional expatriate staff. In light of brain circulation, perhaps this distinction has been muddied considerably. Thus, these paradigms have to be revisited and revised to take into consideration these new realities. Only by capturing and reflecting these new realities can research paint a more accurate picture of the phenomenon under investigation.

References Antal, A. B. and Wang, J. (2003) Organizational learning in China: The role of returners. WZB Discussion Paper, 2003-103. . (accessed 10.12. 2007). Benet-Martinez, V. and Harritatos, J. (2005) Bicultural identity index (BII): Components and psychological antecedents. Journal of Personality 73(4), 1015–1049.

304 Chua, A. (2004) World on Fire: How Exporting from Market Democracy Breeds Ethnic Hatred and Global Instability. Anchor Books, New York. DeVoretz, D. J. and Ma, J. (2002) Triangular human capital flows between sending, entrepot and the rest of the world regions. (accessed 10.12.2007). BBC Survey. (2007) Five times as many Asians as Whites would only marry someone from own racial background. (accessed 10.12.2007). Farrell, D. and Grant, A. J. (2005) China’s Looming Talent Shortage. Shanghai, China: McKinsey & Company. . (accessed 10.1.2.2007). Geithner, P. F., Johnson, P. D. and Chen, L. C. (2004) Diaspora Philanthropy and Equitable Development: China and India. Harvard University Press, Cambridge, MA. Johnson, J. M. (2001) Human resource contributions to US science and engineering from China. A publication of the US National Science Foundation. (accessed 10.12.2007). Kachru, S. H. (2007) Indian techies dominate start-up scene in US. (accessed 10.12.2007). Li, F. (2007) China hit by brain drain, report says. China Daily, June 1. (accessed 10.12.2007). Liu, C. Z. (2008) Lenovo: An example of globalization of Chinese enterprises. Journal of International Business Studies 38(4), 573–577. Luo, Y. and Tung, R. L. (2007) International expansion of emerging market enterprises: A springboard perspective. Journal of International Business Studies 38(4), 481–498. Manpower White Paper. (2007) Confronting the Talent Crunch: 2007 (accessed 10.12.2007). Nonaka, I. and Takeuchi, H. (1995) The Knowledge Creating Company: How Japanese Companies Create the Dynamics of Innovation. Oxford University Press, London. Porter, M. E. (1985) Competitive Advantage: Creating and Sustaining Superior Performance. The Free Press, New York. Saxenian, A. (2006) The New Argonauts: Regional Advantage in a Global Economy. Harvard University Press, Cambridge, MA. Schramm, J. (2006) SHRM Workplace Forecast. (accessed 10.12.2007). Stahl, G. K., Miller, E. L. and Tung, R. L. (2002) Toward the boundaryless career: A closer look at the expatriate career

R.L. Tung concept and the perceived implications of an international Assignment’’. Journal of World Business 37(3), 1–12. Tung, R. L. (1984) Key to Japan’s Economic Strength: Human Power. Lexington Books, D.C. Heath, Lexington, MA. Tung, R. L. (1998) American expatriates abroad: From neophytes to cosmopolitans. Journal of World Business 33(2), 125–144. Tung, R. L. (2004) Introduction to ‘‘China’s leading internet guru Charles Zhang, Chairman of SOHU.com Inc., on how the Internet has changed the world’s most populous nation. Academy of Management Executive 18(4), 143–145. Tung, R. L. (2006) The use of ex-host country nationals in international assignments: A source of competitive advantage or disadvantage? In Keynote speaker at the 26th international congress of applied psychology, Athens, Greece, July 16-21. Tung, R. L. and Larazova, M. B. (2006) Brain drain versus brain gain: An exploratory study of ex-host country nationals in Central and East Europe. International Journal of Human Resource Management 17(11), 1853–1872. Tung, R. L. (2007) The human resource challenge to outward foreign direct investment aspirations from emerging economies: The case of China. International Journal of Human Resource Management 18(5), 868–889. Tung, R. L. and Chand, M. (2007) The role of the Indian diaspora in facilitating bilateral trade between the US/Canada and India. In Paper presented at the 2007 Annual Meetings of the Academy of Management, Philadelphia. Welch, A. and Zhen, Z. (2007) The rise of the Chinese knowledge diaspora: Possibilities, problems and prospects for South and North. In Paper presented at the World Universities Network Forum, London. . World HR Lab Survey. (2004). (accessed 10.01.2007). Rosalie L. Tung is a Chaired Professor of International Business, Simon Fraser University. In 2003–2004, she served as President of the Academy of Management. She was formerly a Wisconsin Distinguished Professor, University of Wisconsin System. She is a Fellow of the Royal Society of Canada, the Academy of Management, the Academy of International Business, and the British Academy of Management. She has published many books and articles on international human resource management, international business negotiations and comparative management.