Immigrants and Firm Performance: Effects on Foreign Subsidiaries Versus Foreign Entrepreneurs
Management Sciences and Quantitative Methods
Prior studies have demonstrated that foreign firms co-locate with immigrants from their home countries, but whether this improves profitability is unclear. We demonstrate that co-national immigrant communities positively affect the performance of foreign firms, and that this effect depends on the type of firm (entrepreneurial venture or MNC subsidiary) and manager (foreign versus local). We found that without an immigrant community, a foreign CEO has a negative effect on the performance of foreign entrepreneurial firms. However, this effect becomes positive as the size of the immigrant community increases because entrepreneurial firms with foreign managers benefit more from their co-national communities than similar firms with local managers. Conversely, MNC subsidiaries derive equal benefits from co-locating with immigrants regardless of their CEO’s nationality. This is consistent with our expectation that entrepreneurial firms rely more on local communities than subsidiaries and that CEOs’ social networks allow entrepreneurial firms to relate to these communities.