58459 POVERTY THE WORLD BANK REDUCTION AND ECONOMIC MANAGEMENT NETWORK (PREM) Economic Premise DECEMBER 2010 · Number 44 JUNE 2010 · Number 18 Trade Abroad Promoting Growth and Institutional Development Talent and the Competitiveness Agenda Home: Skilled at Guilherme Reis and Thomas FaroleDiaspora as Part of the Country José Yevgeny Kuznetsov The global economic crisis has forced a major rethinking of the respective roles of governments and markets in the processes of trade and growth. Indeed, industrial policy seems to be back in fashion--or, at least, talking about it is. But a renewed "activism" by government in the trade and growth agenda need not mean a return to old-style As developing countries embark and "picking winners." Instead, it may mean they face an acuteon competitiveness by policies of import substitution on a policy agenda of innovation-based growth, a stronger focus shortage of competent unlocking the constraints to private sector­led growth. This the discusses the renewed role of government in trade individuals who know the country well, but who are not part ofnote"status quo" and therefore have no vested interests other and the best policy from the competitiveness angle, the it suggests some priorities for the new competitiveness agenda. than growth possible country outcome. Paradoxically,andsearch for these individuals often leads to the country's talent abroad--its skilled diaspora. The best and brightest, who are crucial for innovation, have often left the country in search of better opportunities. The usual policy focus--encourage return of talent to the home country--is often neither realistic nor necessary: members of skilled diasporas can just as effectively engage in joint continuous projects with the home country Export-Led Growth, the to it: a phenomenon called without permanently relocating Crisis, and the End "brain circulation." on the policy environment regarding trade pacts of the crisis of an Era and growth were becoming more apparent. Indeed, in addi- tion to raising concerns over the global commitment to trade The dramatic expansion in global trade over recent decades liberalization, the crisis has also led to some serious rethink- The Twin Problem of Second-Generation has contributed significantly to diversification, growth, and workers often goes abroad--to skilled diaspora. The Africa re- ing of some of the conventional wisdom regarding the Reforms poverty reduction in many developing countries. This period gion, where the grip of vested interests is particularly strong, is growth agenda--the most important result of which is the at the forefront of this trend for recruiting diaspora (the presi- of rapid export growth has on and advance by two critical As developing countries embark been enabled second-gener- likelihood that governments will play a much more activist dent of Liberia and recent finance ministers of Nigeria are re- structural changes in global of the game" vertical finance, ation reforms--changing "rulestrade: (1) thein public and spatial role in the coming years. There are three principal reasons cent examples). fragmentation of manufacturing into highly integrated education, innovation, health systems or infrastructure provi- why governments are likely to be more actively involved in To confront the established and entrenched interests, dias- "global production networks," of (2) the rise of services sion--they face an acute shortageand competent, motivated industrial and trade policy in the coming years.reputation, a pora skills alone will not suffice. Credibility, trade to lead growth of the reforms. Both is these, in turn, peopleand theand manage"offshoring."And itof not just the First, the attitude, long-term planning horizon, discred- risk-takingcrisis has undone faith in markets and tenacity, were made need to by major technological revolutions; and reforms that possiblebe managed. Vested interests (those that and perseverance are also that rely Individuals with such ited laissez-faire approaches essential. simply on trade policy they to lose from change multilateral trade "business as stand were supported byand therefore defendpolicy reforms qualities are considered "overachievers" local markets will- liberalization. Instead, governments and to denote their have and broad liberalizations in domestic the twin problem of usual") need to be tackled as well. This is trade and investment ingness to share their this and education with for activist been "rediscovered." Inskills sense, the demand their home environments situation, competent individuals who know reforms. In thisworldwide. country rather than seek only personal gain. Motivation and government is likely to go well beyond financial markets and country well, yet are not a part of crashing interests, can the The global economic crisis camethe vested into the middle modes of engagement of the policy environment in home regulation, and it will affectdiaspora overachievers with which of this long-running export-led growth party during 2008 be compared to proverbial Archimedean levers to trigger and trade and industrial strategies are designed.learning project.1 countries is the focus of an on-going action and 2009. change. Indispensable yet rare,2007 become insti- sustain the Between the last quarter of they and the second Second, highlights two findings from critical importance This notethe crisis has highlighted thethe project regarding quarter of 2009, global trade for these skilled or educated tutions themselves. The search contracted by 36 percent. But the process of (of sectors, of the overachievers with home of diversificationengagement products, and trading partners) as the recovery started to strengthen in 2010 (at least until in reducing the risks of growth volatility. The recent era of the clouds began to form over Europe), the longer-term im- globalization contributed to substantial specialization of 1 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise 1 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise countries and the process of institutional development. First, When the Taiwanese (China) government decided to pro- the massive return of talent to the home country is typically mote VC industry in the beginning of the 1980s, it had neither neither realistic nor necessary: diaspora overachievers can just the capabilities nor a blueprint. Many were opposed to the idea as effectively engage in joint continuous projects with the because the concept of VC was foreign to traditional Taiwanese home country without returning "home"--a phenomenon (China) practice, in which family members closely controlled called "brain circulation'' (Saxenian 2006; Kuznetsov 2006). all of their businesses' financial affairs. Entrenched interests in When diaspora formulate joint projects, they do not think maintaining the status quo were strong. about far-reaching reforms or institutional development. Yet, The decision by tens of thousands of Taiwan's (China) most and this is the second message, the institutional development talented university students to pursue engineering graduate impact can be significant. degrees in the United States in the 1960s and 1970s, and to take jobs there after graduation, turned out to be part of the Examples of Diaspora Impact on Institution- solution for the VC industry. Opportunities in the United al Development States, were superior to those at home For instance, the large In 1997, Ramón L. García, a Chilean applied geneticist and bio- Hinschu Science Park, opened in 1980, was unable to find ten- technology entrepreneur with a PhD from the University of ants despite aggressive efforts to lure multinationals. Outsiders Iowa, contacted Fundación Chile, a private-public entity in Silicon Valley, the immigrants found each other in technical charged with technology transfer in the area of renewable re- associations and alumni networks that also allowed them to sources. García is the chief executive officer of InterLink Bio- stay in touch with their counterparts in Taiwan (China). But technologies, a Princeton, New Jersey­based company he co- few considered returning home permanently. Policy makers founded in 1991. After jointly reviewing their portfolios of complained about this "brain drain" and sought to limit it and initiatives, Fundación and Interlink founded a new, co-owned none foresaw that it could be an asset. company to undertake long-term research and development A search network (a network to identify successive con- projects. These projects were needed to transfer key technolo- straints and then people or institutions that can help mitigate gies to Chile to sustain the competitiveness of its rapidly grow- the these constraints) consisting initially of key, dynamic, and ing agribusiness sector. Without the combination of García's forward-looking members of the Taiwanese (China) govern- deep knowledge of Chile and his advanced U.S. education and ment and leading overseas Chinese engineers in Silicon Valley exposure to U.S. managerial practice and experience as an en- was central to the emergence of the VC industry. This network trepreneur, the new company would have been inconceivable. did not have a blueprint, yet it did have a role model (Silicon The fact that skilled expatriates can create enormous bene- Valley) and a clear idea of "what to do next." By defining each fits for their countries of origin has come to sudden attention in subsequent step along the road, the network became wider and recent years through the conspicuous contributions that the eventually incorporated skeptics and opponents. Through a large, highly skilled, manifestly prosperous, and well-organized process of intense interactions with the Taiwanese (China) di- Chinese and Indian diasporas have made to their home coun- aspora in Silicon Valley, new laws for VC industry and institu- tries. But García's collaboration with Fundación Chile suggests tions such as Seed Fund provided matching capital contribu- that diasporas do not need to be large and voluminous to pro- tions to private VC funds. Two American-style venture funds, duce an impact: 10 cases of "Ramón Garcia" could transform H&Q Asia Pacific and Walden International Investment Group, entire sectors of the economy in relatively small countries like were also created in the mid 1980s. They were managed by Chile. Moreover, García's collaboration with Fundación Chile U.S.-educated Chinese living overseas who received invitations suggests that even sparsely populated, informal diaspora net- to relocate to Taiwan (China). Once the first venture funds works linking small home countries with their talent abroad proved successful, domestic banks and large companies created have some institutional resources, and may prove capable of de- their own VC funds. Once those started to payoff, even the con- veloping more. Overall, García has created three biotech firms servative family groups decided to invest in VC funds and infor- with Fundación Chile. mation technology businesses. Chile Global2--a network of about 100 "overachievers" of By the late 1980s, when companies like Acer and the return- Chilean origin--was established in 2005 to institutionalize ee company Microtek were publicly listed on the Taiwan Stock contributions that "Ramón Garcías" can make to the Chilean Exchange, the venture capital industry in Taiwan (China) took innovation system. However, this is not where the story ends, off. The conspicuous success of these venture-backed startups but rather where it begins. Chile Global promotes mentoring attracted growing numbers of overseas Chinese back from the relationships between innovation start-ups in Chile and Chil- United States to start businesses. By 1996, more than 2,500 ean "overachievers" abroad. In this endeavor, the Chileans can engineers and scientists had returned to work in the Hinschu study (yet not copy) a now-famous Taiwanese (China) experi- Science Park and 40 percent of the 203 companies based in the ence of creating an early stage venture capital (VC) industry. park were started by returnees. 2 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise The extension of diaspora entrepreneurial projects from co- Supply side: professional advancement of diaspora members founding joint firms in their home countries to cocreating insti- Talent needs time to mature and advance in professional hier- tutional infrastructure so that many similar firms can flourish archy. Junior foreign professionals might prefer to conceal and is natural. The initial objectives of Ramón García and his peers even to forget its foreign origin for the fear of discrimination from Taiwan (China) were both modest and specific: to ad- and to focus exclusively on professional advancement. As vance their professional interests by setting up technology overachievers emerge and become more numerous and di- firms in their home countries. Yet, as the constraints of the verse, senior members of the diaspora start to mentor junior home country institutional environment became apparent to members. As many diaspora overachievers reach the top of them, they engaged in advancing institutional reform to reme- professional hierarchy, a collective credibility emerges. The dy some of these constraints. Successful growth of knowledge- specific trajectory of how each diaspora member made it to based firms and formation of appropriate institutional environ- the top is invariably unique and so the experiences and capa- ment became two sides of the same coin. Innovation bilities of diasporas from Israel, India, China and Armenia, entrepreneurship has blossomed into institutional and policy which are examples of collective credibility and influence, are entrepreneurship. unique. As time goes by, the relatively young, skilled diasporas of Latin America, Africa, and Eastern Europe are maturing International Mobility of the Highly Skilled: and advancing, suggesting a higher incidence of overachievers. Key Stylized Facts This is one reason why the size of skilled diasporas is far from Are these examples mere oddities, exceptions to the general a perfect predictor of the number of overachievers. The Phil- rule, which by the nature of being exceptions are then difficult ippines has a very large tertiary-educated diaspora, yet rela- to engage systematically into reform process? The following tively few overachievers. stylized facts suggest that the potential of diaspora overachiev- Demand side: increasingly diverse pockets of dynamism at home ers should be taken seriously. Durable macroeconomic, political and social stability, which Agglomeration of talent and increasing returns to skills are now a fact of life in most of the developing world, stimulate Migration of skills affects both developed and developing coun- development of regional and sectoral clusters. This signals dy- tries. Due to the increasing returns to skills, talent seeks the namism and growth, even if the national economy is slow grow- environment of similarly talented peers. Few centers of excel- ing or stagnating. Such increasingly diverse pockets of dyna- lence, such as Silicon Valley, are magnets of skills for both devel- mism are sources of demand for highly skilled expatriates and oped and developing countries. For instance, somewhat coun- brain circulation networks. terintuitively, the United Kingdom (UK), not China or India, Analytical Framework: Heterogeneity of used to hold the largest stock of tertiary educated nationals Institutions abroad (table 1). Arguably, the Organisation for Economic Co- operation and Development (OECD) data are highly imperfect To develop operational implications of diaspora engagement and outdated, yet the prominence of the UK's and Germany's with home countries, one needs a compelling theory of insti- diasporas is noteworthy. tutional development at home, a view that helps to identify entry points for diaspora contributions. The central concep- tual block of such a theory is heterogeneity of home country institutions. Table 1. Stock of Tertiary Educated Expatriates in The recent growth literature shows that growth is not hard OECD Economies, 2000 to start, but keeping it going is not easy: doing so requires atten- Rank Country/economy No. of tertiary tion to the context of growth-binding constraints and situation- educated expatriates specific ways to resolve them (Hausmann, Rodrik and Sabel 1 United Kingdom 1,051,885 2007; Sabel 2007). Likewise, the same goes for institutions: it 2 India 996,813 is almost always possible to find some that are working (Sabel 3 Philippines 886,653 4 Germany 855,815 2007; Saxenian and Sabel 2008). The issue is using the ones 5 China 799,834 that work to improve those that don't. This hypothesis assumes 6 Mexico 473,923 that there are nearly always opportunities for development in a 7 S. Korea 425,152 given economy, and that some actors, private and public, begin 14 Taiwan (China) 263,086 to take advantage of them. But while development in this view 21 Ukraine 206,471 32 Brazil 140,764 is not hard to start, neither is it self perpetuating. Senior public 67 Chile 62,072 sector officials with a drive, vision, and ability to take risks Source: OECD Migrants Database 2000 , Set A. (public sector or policy entrepreneurs) introduce new pro- 3 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise grams and policies. Often they do that on an organizational pe- Skills Abroad as Change Agents at Home: riphery, outside of the grip of entrenched interests. The key is Toward a Typology to explain how these institutional and policy start-ups evolve, Economists are familiar with top-down and bottom-up institu- expand, scale up, get transformed, or expire. tional dynamics. Diaspora experiences provides ample evi- Our example of Chile provides a good illustration in this re- dence of both. Reform teams are often composed of the return- gard. The country's institutional framework is far from perfect, ing students and experts as in Indonesia (Berkeley Mafia) and yet it does have a segment that performs well enough to take South Korea (formation of Economic Planning Board and Gov- calculated risks in developing new programs and approaches, to ernment Research Institutes in 1970s and 1980s). Middle East be accountable for such calculated risk-taking, and to assure (Kenner 2010) and Africa provide further examples. Even continuity of performance with the change of administrations. more numerous and diverse are examples of bottom-up dy- Heterogeneity of public sector institutions is matched by namics when a single institutional entrepreneur establishes an heterogeneity of the diasporas of the highly skilled. Only a few enclave organization in higher education, health, or other sec- are experienced, successful, and resourceful enough to engage toral domain (from Africa, Asia, and other parts of the world). in a dialogue about creating innovation firms and institutional Reform dynamics initiated by a group of returning migrants dynamics. But these few individuals could be enough to trigger that led to gradual but far-reaching changes in electricity and a process of reform. Search networks may then match and link other rural infrastructure provision in Morocco in the 1980s better performing and dynamic segments of diasporas and and 1990s (Iskander 2010) is another example. home country institutions, tantamount to "Archimedean le- Yet, in spite of the apparent differences, both top-down and vers" to initiate change and introduce new institutions. bottom-up reforms are vertical and somewhat heroic, as they Usually two issues are at play. First, as already noted, the lo- crucially depend on individuals--reform teams in the top-down cal elite are often entrenched. Diaspora members, in contrast, transformation or a policy entrepreneur in a bottom-up case. know their countries intimately, but they are not (necessarily) Accordingly, the transformation is vulnerable: a new institu- entrenched. Recall our Taiwan (China) example of venture tion established by an entrepreneur functions well as long as it capital industry: overachievers in Silicon Valley not only remains an enclave within (dysfunctional) domestic institu- brought expertise on VC industries, they also helped a cham- tions or an exclave of the world economy--it hits a wall once it pion in the government to make the case for establishing that attempts to diffuse or scale up. Similarly, reform teams leading industry in Taiwan (China) in the first place and that was done top-down transformation can either be removed or with time despite overt resistance from a conservative and closely held lo- can become part of the established elite they sought to trans- cal financial sector. Before catching up, one needs to wake up, form. The top-down reform is also vulnerable because it relies and the diaspora overachievers are sometimes indispensable in on return migration--often a plainly unrealistic or expensive providing a wake-up call: they have a rare combination of cred- (cost of salary subsidies to make salaries comparable to the op- ibility, motivation, and expertise to do that.3 portunity costs of the returning talent) proposition. In addi- The second consideration relates to the so-called learning or tion, as soon as the diaspora member is returned, he or she is switching costs of introduction of a new institution. In the me- likely to become part of the entrenched vested interest again. dium term, a new institution (say, private credit bureau) can All of these considerations make an attractive alternative--lat- benefit all stakeholders, yet in the short run there are switching eral and horizontal--inside-out reform (table 2). costs for actors (such as local banks) to learn new skills and rou- As the Taiwanese (China) example illustrates, the inside-out tines, and to overcome initial resistance to innovation. The transformation bets on the heterogeneity of the elites: it creates switching costs can be high. For instance, many international an alliance between forward-looking and dynamic segments, firms have attempted to establish private credit bureaus in Ar- incorporating the diaspora overachievers into the elite. The menia, and were deterred by high switching costs, but a dias- transformation often starts with institutional innovation ig- pora overachiever from California (with the usual combination nored by established players (large banks and firms didn't take seriously the venture capital program in Taiwan [China]). The of profit maximization and intrinsic motivation to get involved inside-out transformation occurs by incorporation--turning in Armenia) had a planning horizon long enough to make the the established elite into an ally of the institutional innovation. switching profitable and worthwhile. Ultimately, it is the dynamic segments of home country in- Policy Implications: Toward a New Genera- stitutions that will do the work. However crucial the Silicon tion of Diaspora Initiatives Valley overachievers were in triggering the Taiwanese (China) VC industry, it was a set of new national programs and proce- How does matching of dynamic segments of diaspora talent dures that made the difference: the diaspora members help to and dynamic segments of the government occur? Ramon Gar- perform the search for individuals, expertise, and institutions cia stumbled at his match--the CEO of Fundación Chile at Mi- to articulate a missing component of development. ami airport. Is it possible, and if so how, to create an environ- 4 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise Table 2. Skills Abroad as Change Agents at Home: Typology Top-down transformation Bottom-up change Inside-out reform Change agents Returning students and other experts form Policy or institutional entrepreneurs Diaspora overachievers and government reform, policy-making, and policy advice establish new institutions at home champions jointly initiate and sustain teams multiple, incremental changes from diverse entry points Examples Indonesia:1966/1983--Berkeley Mafia Single, institutional entrepreneur Taiwan (China): Creation of VC industry in South Korea: 1970s and 1980s-- establishes an enclave organization in the 1980s Economic Planning Board and Government higher education, health, or other sector: India: Improvement in the legal Research Institutes many examples in Africa, Asia, and other and institutional framework for Nigeria: On-going, top decision-making parts of the world entrepreneurship in the 1990s positions in the government China: Science and technology parks for returning technical talent How transformation Mobilization: Top decision maker Entrepreneurship: Individuals act despite Bootstrapping: Joint search for solutions occurs facilitates university education abroad obstacles relying on and leveraging better- and installs reform, policy advice, or performing segments of government and technical teams on the basis of returning public sector skills Vulnerabilities/risks Reform team is removed or becomes Reforms hit a wall: Enclaves fail to Transformation is incremental: It is entrenched expand, diffuse, or turn into role models relatively robust, but slow and may fizzle to follow out Specific assets (skills, Technical skills in a specific area: Both the technical skills and unusually Creative and pragmatic problem solving: motivation) of talent economic, scientific, or technological high self-motivation to prevail and While technical skills are useful, the key abroad expertise succeed is the capability to research and combine knowledge from diverse policy domains Dealing with entrenched Shake up: Effective in the short term, Assault: Direct confrontation (may work Transformation: Turning forward-looking and vested interests but risky in the longer term (as vested in specific domains) segments of the vested interests into interests regroup and strike back and Strategic bet: That the institutional allies. Robust and effective in the long as diaspora itself becomes again part of innovation would be initially ignored by run, but vulnerable as transformation vested interests) the vested interests as an oddity and then can occur the other way around (change could be protected by its own success agents are incorporated into vested interests) International migration Starts with return migration, which may Typically, return migration Starts with brain circulation, which, if the perspective turn into brain circulation reforms succeed, leads to return migration (as the talent abroad creates conditions and opportunities for its own return) Source: Compiled by author. ment facilitating serendipitous matches between domestic and The first follows the logic of how Ivy League universities diaspora champions? work with their alumni. An intentionally small group of dias- With few exceptions (such as South Korea in the 1970s), pora overachievers are invited to join an elite diaspora program: centralized schemes, particularly those managed by the govern- Global Scot has about 900 members, whereas Chile Global ment, have proved to be of limited efficacy in terms of reaching about 100. The program is housed within an entrepreneurial this objective. And so are many recommendations of the cur- and capable economic development organization (Scottish En- rent diaspora debate: ever more detailed studies of diasporas, terprise and Fundación Chile respectively) to follow up on the digital diaspora networks, and conferences of diaspora mem- joint projects. Significantly, even for those highly capable orga- bers. They are useful as entry points and initial introduction, nizations, the binding constraint is in the home country: its but they cannot substitute for detailed and lengthy discussions ability to follow up and implement ideas and projects of the over possible joint projects between public sector champion(s) diaspora members rather than commitments of the diaspora. and diaspora overachiever(s). This observation indicates that this high-intensity approach Three approaches have emerged to provide a framework to is predicated on sophisticated domestic capabilities, an ap- articulate and implement joint projects. proach that might be too demanding for low-income countries. 5 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise A contrasting "light touch" approach focuses on dissemina- home economies goes beyond their direct economic impacts. tion success stories of diaspora--home country interactions and Diasporas of the highly skilled can contribute to institution generally on learning from emerging good practice. Through building through multiple, incremental changes that lead to the focused workshops, the objective is to transform success stories transformation of private and public sector institutions. into role models to follow. Direct economic impact is about the breadth of diaspora en- A third approach, which is just emerging, intends to provide gagement, whereas the institution-building impact is about its room for bottom-up creativity and initiative, while ensuring the depth. While remittances and donations--currently the focus sharing of best practice between decentralized and bottom-up of migration debates--are important for poverty reduction, the projects and experiments. A contest, pioneered independently key issue is how to turn migrants and diasporas into agents of in Mexico in 2009 and Russia in 2010, provided matching change in institutional development in their home countries. funds to organizations in a home country interested in articulat- Members of expatriate communities, particularly over- ing and running a project with diaspora members that advance achievers, have three characteristics that position them to make their own missions and objectives. Both in Russia and Mexico a unique contribution to the development of their home coun- the beneficiaries are domestic research and development organi- try: a strong motivation to "make their mark" despite and zations. These contests are too new, so the jury is still out on against many odds; knowledge and expertise of both global op- their performance. The key feature is their focus on domestic portunities and local particulars; and (not always, but frequent- organizations as immediate beneficiaries, not on the diaspora ly) resources to act on new opportunities. When these resourc- members. This reflects the understanding that domestic capa- es combine, usually as a matter of serendipity, the impact on bilities are key binding constraints and also provides an entry home country development can be substantial. Yet these re- points for domestic champions to articulate their projects. sources can combine also in a negative way: diaspora overachiev- In such a contest, one organization might be interested, say, ers can also become ferocious rent seekers allying themselves in leveraging diaspora professionals to test new methods of de- with reactionary and backward-looking vested interests in the livery of preventive medicine to a low-income population. It home country. would then formulate a proposal for the diaspora contest which Paradoxically, it is home country institutions that appear will be considered receiving matching fund contributions. Op- to be key determinants of diaspora impact. Yet both home erational details would obviously differ from country to coun- country institutions and diaspora are highly heterogeneous. try, but such a contest fund would have clear eligibility criteria When dynamic, forward-looking, and better-performing seg- and could support institutionalized diaspora initiatives for a ments of the diaspora and the government develop joint prag- period of up to three years with a limit of $100,000 contribu- matic projects, these projects have the potential of triggering tions per year, and support 10­20 focused, global search initia- institutional dynamics that are at once humble (in the short tives with the help of diaspora. term) and ambitious (in the long run): economic and institu- Ideally, each diaspora network, within a portfolio of initia- tional change that begin in certain locations and/or sectoral domains, and advance through partial and incremental (mi- tives to be supported by the contest, would be characterized by crolevel) reforms that with time may aggregate into larger- the following features: scale transformations. · The ability to identify, bet on, and manage strategic first movers. Strategic first movers are individuals with a longer About the Author than usual planning horizon: they are not philanthropists, yet they have more patience in seeing returns on their effort Yevgeny Kuznetsov is senior economist in Economic Policy and Debt and investment. Department of the Poverty Reduction and Economic Management · Focus on mentoring as a key feature in nourishing joint proj- Network. ects between diasporas and home country organizations. Endnotes Another way to describe a search function of diaspora mem- bers is to characterize them as mentors: they do not do the 1. This note is based on some of the findings from the project work themselves, but primarily help home country organi- "How Can Talent Abroad Help Reform Institutions at Home" zations to perform their functions better. funded by the MacArthur Foundation (visit the Global Dias- pora Project Web site for more information about the project). Conclusion 2. Visit www.ChileGlobal.org for more information. Direct economic impacts of diaspora relate to the remittances, 3. This is not to say that diasporas cannot themselves become donations, investments, and knowledge of diaspora members. entrenched. Diaspora organizations can pursue narrow objec- These impacts are well known and documented, particularly the tives with little consideration of the interests of the country size and dynamics of migrant remittances (World Bank 2010). they presumably represent. Long-distance nationalism of dia- This note points out that the increased salience of diasporas to sporas (see Kapur [2006]) can be unproductive and detri- 6 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise mental. A tendency of diaspora organizations to become en- Iskander, N. 2010. Creative State: Forty Years of Migration and Development Policy in Morocco and Mexico. Ithaca, NY, and London: Cornell University Press. trenched and pursue narrow objectives is one reason to focus Kuznetsov, Y. 2006. Diaspora Networks and the International Migration of on informal diaspora networks and individual overachievers. Skills: How Countries Can Draw on Their Talent Abroad. Washington, DC: World Bank. References Sabel, C. 2007. "Bootstrapping Development: Rethinking the Role of Public Intervention in Promoting Growth." In On Capitalism, ed. Victor Lee and Kapur, D. 2006. "The Janus Face of Diasporas." In Diasporas and Development, Richard Swedberg, 305­41. Stanford University Press. ed. Barbara J. Merz, Lincoln C. Chen, and Peter F. Geithner. Harvard Uni- Saxenian, AnnaLee. 2006. The New Argonauts: Regional Advantage in a Global versity, Cambridge, MA. Economy. Cambridge, MA: Harvard University Press. Kenner, David. 2010. "How to Be a Middle East Technocrat." Foreign Policy Saxenian, AnnaLee, and Charles Sabel. 2008. "Venture Capital in the `Periph- July/August. http://www.foreignpolicy.com/articles/2010/06/21/how_ ery': The New Argonauts, Global Search and Local Institution Building." to_be_a_middle_east_technocrat. Economic Geography 84 (4). Hausmann, Ricardo, Dani Rodrik, and Charles Sabel. 2007. "Reconfiguring World Bank. 2010. "Migration and Development Brief." http://siteresources. Industrial Policy: A Framework with an Application to South Africa." worldbank.org/INTPROSPECTS/Resources/334934-1110315015165/ http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1245702. MigrationAndDevelopmentBrief12.pdf. The Economic Premise note series is intended to summarize good practices and key policy findings on topics related to economic policy. They are produced by the Poverty Reduc- tion and Economic Management (PREM) Network Vice-Presidency of the World Bank. The views expressed here are those of the authors and do not necessarily reflect those of the World Bank. The notes are available at: www.worldbank.org/economicpremise. 7 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise