Immigrant social capital and firm strategic heterogeneity: effects on foreign entry and firm performance.

Abstract

I explore the effects of firms' ties to co-national immigrants on foreign entry and performance. I argue that location choice and subsidiary survival are influenced by immigrant social capital--which arises from common country bonds and becomes activated when firms co-locate with immigrants of the same nationality in a host location. Moreover, firms respond to and benefit differentially from the resources available through immigrant social capital based on heterogeneity in capabilities, resource needs, and the types of buyers they target. I test these ideas on a sample of foreign investments made by 197 firms from 27 countries into the U.S. between 1998 and 2003. Using a unique set of instruments to account for selection bias, I find strong support for my propositions. This dissertation makes theoretical contributions by showing that immigrant social capital provides firms with unique location-based advantages, and that strategic heterogeneity explains which firms seek out and benefit from social capital. It also has practical implications for managers and policy makers.