Migration and outward FDI: a double direction approach

Abstract

Purpose The purpose of this study is to identify, based on social network theory, the relationship between the direction of international migration (immigration/emigration) and the international movement of enterprises and their location. Design/methodology/approach A traditional gravity model and the Tobit estimation method are applied to three groups of countries from three different regions: Latin America, North America and the European Union. The study considers a period from 2001 to 2012. Findings The main results suggest that the international migration that goes from the European Union and North America to Latin America is related with the firms’ internationalization and their respective location. Practical implications Given that migration can be an important and reliable source of information, trust and knowledge, managers should see it as a “bridge” between the home and host countries, which, in turn, can increase their competitive advantage. Social implications Governments can learn how migration and outward foreign direct investment interact. In addition, they could develop political frameworks to accurately and effectively manage international migration (immigration and emigration) and FDI in the best interests of the stakeholders. Originality/value This study extends the social network theory by suggesting that networks are not only related with firms’ expansion abroad but as well with their location. This statement could be generalizable as long as emigration/networks (ethnic ties) are considered the links between the home and the host country.

Ethnic networks and multinational firms’ location decisions

“…As the evidence suggests, regardless of the home country and the host country, the effect remains the same as long as the actors in the ethnic networks and the domestic firms move in the same direction (Alcaraz and Salamanca P., 2018). The three dimensions of a social network, the concept of institutional affinity and the homophily principle explain this phenomenon primarily because ethnic networks share a nationality with the firms in the immigrants' country of residence, which eases the acquisition and transfer of information, builds trust and encourages referrals based on interpersonal relationships and shared meaning among members in the network.…”

“…(1) the actors of a given network move from the home country to the host country, and MNEs move in the same direction; and (2) the actors of a network move from the home country to the host country, and MNEs move from the host country to the network actors' home country (Alcaraz and Salamanca P. 2018).…”

“…This relationship has been analyzed under two different scenarios. In both of them, members of the ethnic network move from the home country to the host country, influencing, in the first case, the location of firms from the home country of the ethnic networks members to their host country of residence and in the second, the location choices of firms from the ethnic networks' host country to their home country (Alcaraz and Salamanca P., 2018). In the latter scenario, generally speaking, a positive relationship has been identified (Docquier and Lodigiani, 2010) for firms going to the USA (Kugler and Rapoport, 2007), for US firms going to developing and developed countries (Shukla and Cantwell, 2018), for Taiwanese firms going to China (Chen and Chen, 1998) and for firms going to India (Zaheer et al, 2009).…”

Modelling factors connected with the effect of international migration for security and economy

“…Garas, A. Lapatinas, K. Poulios explored, based on a panel data analysis, the relationship between human migration and OECD's foreign direct investment [Garas et al 2016]. J. Alcaraz and E. Salamanca identified the relationship between the international movement of enterprises and their location, and the direction of international migration (immigration/emigration) [Alcaraz, Salamanca 2018]. K.F.…”

Diversification strategies and equity market performances

“…Bany-Ariffin et al (2016) demonstrated in empirical findings that investing abroad had a positive impact on Malaysian MNEs" financial performance. Furthermore, looking at the relationship between FDI and migration patterns, Alcaraz and Salamanca (2018) shared in their findings that international migration from the European Union and North America to Latin America is, "related to the firms' FDI and their respective location".…”