Returnee entrepreneurs have been recognised as a catalyst for economic development and innovation in the homeland, yet the mechanisms through which returnees contribute to firm performance and development remain underexplored. This study explores the role of mediating knowledge transfer in the relationship between returnee migration and firm performance. Using structural equation modelling on a sample of 151 firms owned by returnee entrepreneurs in Kosovo, the findings reveal that returnee migration alone does not significantly enhance firm performance. Instead, knowledge transfer serves as a key mediator and enables firms to leverage the expertise, skills, and international networks acquired abroad. The results confirm that effective knowledge transfer significantly contributes to firm performance, emphasising the importance of absorptive capacity within firms to maximise the benefits of returnee knowledge. The study offers theoretical implications by refining our understanding of migration-driven firm development and practical implications for managers and policymakers aiming to harness the potential of returnees.
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