Immigration boosts innovation in Finnish manufacturing, supports native employment

A recent study by the Research Institute of the Finnish Economy (Etla) reveals that an increase in immigrant workforce enhances process and product innovation in Finland's manufacturing sector and leads to a higher number of patent applications. Immi

By: helsinkitimes.fi

Jan 04 2025
30
2672 Views

Immigration boosts innovation

A recent study by the Research Institute of the Finnish Economy (Etla) reveals that an increase in immigrant workforce enhances process and product innovation in Finland's manufacturing sector and leads to a higher number of patent applications. Immigration has no negative impact on the employment of native workers and may even support their job opportunities. The study recommends measures to make Finland more attractive to foreign talent to foster economic growth.

The study, titled "Immigration and Innovation in Finnish Manufacturing Firms" (ETLA Working Papers 124), examined the relationship between immigration and innovation in Finnish manufacturing companies from 2000 to 2018. The data used included information on workers' immigration backgrounds, patent activities, process and product innovations, and innovation expenditures. The findings indicate that immigrant employees contribute significantly to corporate innovation efforts and increase patent applications in firms.

"Immigration reduces external R&D costs for companies, suggesting that immigrant employees can substitute for externally acquired innovation inputs," said Dr Terhi Maczulskij, Research Director at Etla.

The analysis also found no evidence of adverse effects of immigration on the employment of native workers. On the contrary, the presence of immigrant employees can bolster the job prospects of Finnish-born workers.

To maximise the economic benefits of an immigrant workforce, Finland needs to address two critical issues that diminish its appeal in the global labour market. First, ethnic discrimination in recruitment remains widespread. Second, despite an increase in skilled foreign workers arriving in Finland over the past decades, a significant proportion—up to half—leave the country within a few years.

"Efforts must focus on reducing recruitment discrimination and encouraging companies to hire immigrants. Strategies are also needed to improve workplace cultures to better support the successful integration of immigrant employees," Maczulskij added.

Dr Maczulskij is the Research Director at Etla, Research Manager at the Yrjö Jahnsson Foundation, and a Research Fellow at IZA. The study was funded by Business Finland.