Multinational enterprises today face mounting challenges as the complexity of innovation increasingly demands a highly skilled, diverse pool of R&D professionals, often recruited from around the world. Access to global talent lets employers bring in specialized expertise and fresh perspectives that can lead to breakthrough innovations.

However, immigration policies are tightening in many countries. For example, Australia, New Zealand, Singapore, and the U.K. have all recently introduced or plan to implement immigration restrictions targeting the high-skilled talent pool that forms the backbone of multinational R&D operations.

Such restrictions are making it difficult for multinational enterprises (MNEs) to recruit and allocate skilled workers to the locations where they are most needed. How should companies reorganize their R&D efforts to manage the constraints imposed by restrictive immigration policies? Our research found that MNEs have a set of strategies from which they can choose, depending on the nature of the research they are conducting and how tightly they need to control knowledge flows. But first, it helps to understand why MNEs are reliant on global R&D talent and how immigration restrictions affect organizations’ ability to innovate.

The Case for Global Talent Acquisition

The breadth of specialized knowledge and skills required for innovation leads many MNEs to implement global recruitment strategies to staff their headquarters’ R&D operations. For example, most R&D in U.S.-based MNEs remains domestic, with studies indicating that 60% to 70% of R&D activities are centered at home.1 Official administrative data indicates that 61,786 U.S.-based MNE units applied for visas to bring foreign knowledge workers to the U.S. from 2022 through 2024.2

This arrangement not only reduces coordination costs but also facilitates the seamless exchange of tacit knowledge, which comprises things an individual knows how to do but cannot write down and transmit to remote locations or recipients.3 Close physical proximity also enables spontaneous interactions, enhances team cohesion, and supports real-time problem-solving and rapid iteration. Colocated teams can more easily foster trust and rapport — essential elements of effective collaboration, especially in innovation-intensive projects, where continuous refinement and integration of knowledge are critical.4

Restrictive immigration policies disrupt this setup by limiting MNEs’ ability to transfer highly skilled foreign employees to central R&D hubs in their home countries. In the U.S., for instance, reductions in H-1B visas for foreign professionals with specialized skills and increased scrutiny of skilled foreign workers have forced companies to reassess their talent-sourcing strategies.5 As a result, many R&D activities that MNEs would prefer to undertake with colocated teams must be implemented with geographically dispersed teams or shelved altogether.

When R&D teams are spread across multiple countries, MNEs encounter significant coordination hurdles and transaction costs. Our study found that physically colocated teams produce innovation outcomes that are both higher in quantity and superior in quality compared with the outputs of geographically dispersed teams. In dispersed teams, communication and coordination occur through a mix of synchronous and asynchronous interactions. Without the benefits of the physical proximity that comes with colocation, companies struggle to sustain the same level of spontaneous collaboration, often missing out on valuable synergies that naturally arise in shared physical spaces. Consequently, the complex process of knowledge exchange — which is fundamental to innovation — becomes slower, more costly, and less effective.

The availability of R&D workers is also negatively affected by policies that restrict or dissuade foreign students from enrolling and graduating from universities in the region. As knowledge intensity of the industrial landscape increases, STEM doctoral programs at universities are a magnet for global talent and represent a crucial source of R&D workers for businesses.21 Our four strategies must be viewed holistically to include not only highly skilled knowledge workers in corporate settings but also in universities worldwide.

Ultimately, thriving in an environment of restrictive immigration policies requires MNEs to rethink their R&D talent strategies. By adopting a resilient and adaptable mindset, they can not only sustain innovation but also uncover new opportunities for competitive advantage. Through refined R&D strategies that accommodate these constraints, MNEs can position themselves to remain agile and innovative, and capable of navigating policy shifts — an essential capability in today’s global economy.