Immigrants and Foreign Firm Performance.

Abstract

Studies have demonstrated that foreign firms locate where immigrants from their home countries reside and suggested that doing so can improve performance. We argue that, to properly assess how immigrants impact the performance of co-national firms, research must account for heterogeneity in how independent foreign entrants (owned by individual foreigners) versus MNC subsidiaries (owned by a foreign corporate parent) benefit from immigrant communities. Independent entrants have a greater need for resources from the immigrant community and depend more on their individual managers’ personal connections within the community to obtain such resources. Subsidiaries of MNCs can instead rely on the impersonal organizational resources of their parent firm (e.g. brand, reputation, channels) to access valuable immigrant community resources. Using data on foreign firms in Russia during 2006-2011, we find that immigrants improve the profitability of co-national independent firms only if they are managed by immigrant CEOs, whereas co-national MNC subsidiaries profit from immigrants regardless of their CEO’s nationality. Our study suggests that while organizations benefit from the resources of co-national immigrant communities in foreign markets, the means by which they activate them—personal or impersonal—systematically vary across different types of firms.

Keywords: Immigrants, Multinational Corporation (MNC), Immigrant Entrepreneur, Foreign Subsidiary, Immigrant CEO, Domestic CEO, Embeddedness, Firm Performance

JEL Classification: M13, F23, F22, M1