Types of firms generating network externalities and MNCs' co‐location decisions

Abstract

This study identifies and examines sources of network externalities that influence MNCs to agglomerate their foreign operations in specific regions. Using data for Korean firms that invested in China, this study found that network externalities were sensitive to the types of firms constituting a regional network. It also found stronger network externalities within firms than across firms, from firms of the same nationality than from those of different nationalities, and from firms in the same industry than from those of different industries. As we defined the types of firms more precisely, distinctive curvilinear relationships between network externalities and the likelihood of co‐location emerged. Copyright © 2005 John Wiley & Sons, Ltd.

Core or periphery? The effects of country-of-origin agglomerations on the within-country expansion of MNEs

“…Rezaei (2011) described co-ethnic communities as concentrated nodes in relatively restricted spatial areas within global cities, functioning like bazaar-type economies (Dana et al, 2008) based on social norms from the country of origin of the respective co-ethnic community (Shin, Hasse, & Schotter, 2016). However, only agglomerations that maintain a sufficient number of co-ethnic MNEs can develop into co-ethnic communities, because the local co-ethnic population requires a certain level of co-ethnic activity to establish co-ethnic schools, banks, law firms, and other support services (Chang & Park, 2005;Rezaei, 2011). While observing and identifying such communities is quite difficult, they are strongly coupled with the density of coethnic agglomerations (Waldinger, 1995).…”

“…Their shared cultural background, common social norms, and social ties facilitate market interaction and information sharing (Agrawal, Kapur, & McHale, 2008;Chang & Park, 2005;Kim, 2015;Li et al, 2015;Miller et al, 2008;Tan & Meyer, 2011). Moreover, local actors adapt to the concentration of samecountry MNEs by acquiring language and cultural knowledge, which reduces the liability of foreignness faced by MNEs from that particular country of origin (Manning, Sydow, & Windeler, 2012;Miller et al, 2008;Tan & Meyer, 2011;Zaheer, 1995).…”

“…For instance, co-ethnic colocation and community effects with respect to FDI have been reported for Korean firms (Chang & Park, 2005;Guillén, 2002;Li et al, 2015), East Asian and Southeast Asian banks (Zhu et al, 2012), North American, European and Asian firms investing in Vietnam (Tan & Meyer, 2011), and European and Japanese firms investing in the United States (Bobonis & Shatz, 2007). Moreover, Hernandez (2014) linked co-ethnic immigrant populations to FDI location choice and subsidiary survival, using a sample of MNEs from 27 different home countries investing in the United States.…”

Strategies of Post-entry Foreign Expansion: Speed-up or Slow-down?

“…In research on international business, timing of entry (Delios & Makino, 2003;Isobe, Makino & Montgomery, 2000), decisions of entry mode (Chang & Rosenzweig, 2001), as well as location choices (Chang & Park, 2005;Henisz & Delios, 2001;Hennart & Park, 1994), time has already been taken into consideration in studies, and the emphasis was mostly on the discussion of initial entry.…”

“…A number of researchers note the sequential expansion drawing on an evolutionary point of view (Chang, 1995;Chang et al, 2005;Chang et al, 2001;Guillen, 2003). Several authors also highlighted the dynamics of international expansion, such as Acedo and Jones (2007), Morgan-Thomas andJones (2009), Musteen, Francis, andDatta (2010), and Prashantham and Young (2011).…”