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Finding a Home away from Home: Effects of Immigrants on Firms’ Foreign Location Choice and Performance

Zeke Hernandez

Using data from a sample of foreign subsidiaries established in the U.S. by firms from 27 countries between 1998 and 2003, this study examines the relationship between immigrants and the foreign expansion of organizations from their home countries. I propose that common country bonds to immigrants can become unique channels of knowledge, providing firms with idiosyncratic benefits in foreign places. Such connections to co-national immigrants should positively influence location choice and survival through processes of local learning and knowledge transfer. The results support these predictions. The probability of locating operations and surviving in a state increases with the concentration of same-nationality immigrants in that state, but not with the presence of immigrants of other nationalities. To highlight the knowledge-related mechanisms, I show that these relationships are particularly strong for firms lacking prior experience in the country, for locations in which immigrants can help firms capitalize on industry-specific knowledge spillovers, and for firms with highly knowledgeintensive operations.

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