When do ethnic networks help with foreign direct investment location?

Abstract

Purpose The purpose of this paper is to identify how the cultural attributes of ethnic networks affect foreign direct investment (FDI) location. Design/methodology/approach The study tests on panel data the effect of ethnic networks in interaction with their member’s cultural attributes on FDI location. Findings Results show that ethnic networks whose members predominantly exhibit a human orientation do not affect FDI location. However, when performance orientation is the predominant cultural attribute of the members of an ethnic network, there is a positive and significant effect on FDI location. Practical implications Managers need to be aware that not all networks will be equally helpful in achieving particular goals. For instance, ethnic networks where the performance orientation is dominant among their members affect FDI location, unlike ethnic networks where human orientation is dominant. Therefore, decision-makers need to identify and align these two elements (networks and goals) to maximize outcomes. Originality/value This study contributes to the literature by suggesting that FDI location is affected by ethnic networks where performance orientation is dominant among the members, which is not the case when human orientation is dominant among the members of the ethnic networks.

Role of formal and informal networks in the relationship between government support and Ghanaian indigenous firms’ degree of internationalisation

“…As government and the regulatory bodies improve information delivery about the local and international markets relating to export activities, as well as supporting local firms in networking and collaboration with distributors, producers and international agents/firms, the resultant effect will be high degree of internationalisation of indigenous firms (Bowen, 2019; Zhang et al , 2016). However, the findings revealed that informal networks are insignificant factors in increasing firms’ degree of internationalisation which is inconsistent with the findings such as Alcaraz and Salamanca (2022), Kryeziu et al (2021) and Santhosh (2020).…”

“…Interestingly, this study established that not all network relationships will be equally important in stimulating activities and promoting performance (Alcaraz and Salamanca, 2022), particularly in the export business. For instance, whiles formal network regarding established collaborative relationships with local and international firms to expand export activities to existing serviced markets or new markets significantly increase firms’ export activities, informal networks with other export entrepreneurs, classmates, friends and relatives, among others, though positive yet insignificantly effect on the local exporters’ degree of internationalisation.…”

“…From the internationalisation perspective, network theory argues that a well-established internationalised firm enjoys direct relationships with an international agent as a result of the network relationship (Johanson and Mattsson, 1988). Besides, a well-established network relationship with family and friends, members of similar national origins enable exporting firms to gain foreign market information and unique resources, which they leverage to perform better in the international market (Alcaraz and Salamanca, 2022; Kryeziu et al , 2022; Santhosh, 2020). Zain and Ng (2006) defined networking to include the firm’s formal and informal relationships with families, friends, government officials/bodies, customers, suppliers, competitors and any individuals who help firms to expand business operations.…”

“…For instance, in an unfavourable or challenging institutional context, informal ties with family and relatives abroad, and with employees with international experience, serve as a source of information, and a means of accessing technical advice and business opportunities to facilitate entry into new markets and stimulate internationalisation (Marinova and Marinov, 2017; Omokaro‐Romanus et al , 2018; Morais and Ferreira, 2020). Put differently, it is recognised that with a well-regulated collaborative social network relationship, firms are able to acquire relevant market information, valuable resources and business support advice about the foreign market which they leverage to identify market opportunities, expand to new markets and increase their degree of international operations (Alcaraz and Salamanca, 2022; Kryeziu et al , 2021; Santhosh, 2020). Thus, a highly built network relationship aids exporting entrepreneurs in gaining access to differentiated knowledge and distinctive resources which significantly increase market opportunities and competitive advantage and positively accelerate the pace, scope and degree of internationalisation (Barcelos et al , 2022; Santhosh, 2020).…”