Immigrants and Firm Performance: Effects on Foreign Subsidiaries versus Foreign Entrepreneurial Firms
43 Pages Posted: 18 Aug 2016
Date Written: August 14, 2016
Prior studies have demonstrated that foreign firms co-locate with immigrants from their home countries, but whether this improves profitability is unclear. We show that co-national immigrant communities positively affect the performance of foreign firms, but that there is significant heterogeneity in this effect depending on the type of firm (entrepreneurial venture or MNC subsidiary) and manager (immigrant versus local). We found that the immigrant community had a much stronger effect on the profits of foreign entrepreneurial firms when they were managed by an immigrant vs. a native CEO. Conversely, MNC subsidiaries derived equal benefits from co-locating with immigrants regardless of their CEO’s nationality. This is consistent with our expectation that entrepreneurial firms have a greater need to be locally embedded and rely more on their local managers’ personal networks to derive benefits from local communities, whereas subsidiaries can derive such benefits based on the established organizational resources of the MNC.
Keywords: Immigrants, Multinational Corporation (MNC), Immigrant Entrepreneur, Foreign Subsidiary, Immigrant CEO, Domestic CEO, Embeddedness, Firm Performance
JEL Classification: M13, F23, F22, M1
Suggested Citation: Suggested Citation