Beschreibung:
This paper shows the impact of immigration and ethnic diversity on corporate behavior. I use the lifting of the trade embargo against Vietnam as an exogenous shock to product market competition, I show that immigrant networks formed before the embargo was lifted is the channel through which competition affects corporate policies. I exploit the random allocation of Vietnamese refugees across the U.S. using a difference-in-differences method and an instrumental variable approach as identification strategies. I show that corporations incorporated in states with higher shares of Vietnamese immigrants reduce their investment and leverage, but increase research and development expenditures, and cash holdings after the embargo was lifted relative to the corporations located in the states with a lower share of Vietnamese immigrant. The effect on capital expenditures only exists in the textile industry in which Vietnamese refugees are more involved and not in other industries. The impact extends for the twelve years after the embargo was lifted. I show how immigrant networks can play a significant role in transmitting foreign competition shocks to businesses