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Immigration and Innovation in Finnish Manufacturing Firms

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  • Maczulskij, Terhi

Abstract

This study examines the relationship between immigration and firmlevel innovation in the Finnish manufacturing sector. The analysis leverages unique matched data, including employees’ immigration status, firm-level patenting, process and product innovation activities, and innovation inputs spanning the 2000–2018 period. To address the potential endogeneity of a firm’s immigrant employment, an instrumental variables approach is employed using the historical geographic distribution of immigrants in the region where the firm is located. The results reveal that an increase in immigrant employment positively influences process and product innovation, and skilled foreign knowledge boosts the number of patent applications. Additionally, immigration leads to reduced external R&D expenditures, indicating that immigrant workers may substitute outsourced innovation inputs. The study also finds no evidence that immigration adversely affects native workers’ employment in Finnish firms. By contrast, it may benefit natives with complementary skills.

Suggested Citation

  • Maczulskij, Terhi, 2025. "Immigration and Innovation in Finnish Manufacturing Firms," ETLA Working Papers 124, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:wpaper:124
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    References listed on IDEAS

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    1. Pierpaolo Parrotta & Dario Pozzoli & Mariola Pytlikova, 2014. "The nexus between labor diversity and firm’s innovation," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(2), pages 303-364, April.
    2. Jennifer Hunt & Marjolaine Gauthier-Loiselle, 2010. "How Much Does Immigration Boost Innovation?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 31-56, April.
    3. Jürgen Bitzer & Erkan Gören & Sanne Kruse-Becher, 2021. "Absorption of foreign knowledge: the impact of immigrants on firm productivity [Identification properties of recent production function estimators]," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 30(3), pages 706-739.
    4. Wulong Gu & Feng Hou & Garnett Picot, 2020. "Immigration and firm productivity: evidence from the Canadian Employer-Employee Dynamics Database," Journal of Productivity Analysis, Springer, vol. 54(2), pages 121-137, December.
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    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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