How Immigrants Can Influence a Firm’s Foreign Expansion

In a new paper titled, “Finding a Home away from Home: Effects of Immigrants on Firms’ Foreign Location Choice and Performance,” Wharton management professor Exequiel Hernandez examines the relationship between immigrants and the foreign expansion of companies from their home countries.

Knowledge@Wharton asked Hernandez to summarize his research and discuss its implications for businesses, employees and investors.

An edited transcript of the conversation follows.  

Knowledge@Wharton: Zeke, please briefly describe your research.

Exequiel Hernandez: In my research, I wanted to study the effect that immigrants have on the internationalization process of firms from their home countries. So, for example, think of a firm from Japan or Brazil [that is] planning to invest in a country like the United States. Do they pick a location where there are Brazilian or Japanese immigrants? And if they do, is that actually a good choice for their performance? And assuming that I find those effects, why are they happening? What is it that the immigrants are providing?

To answer those questions, I gathered some data on the investments of firms from 27 countries into the United States from 1998 to 2003. Then I tracked the performance of those investments for several years after.

Knowledge@Wharton: What are the key takeaways of your research?

Hernandez: There are three key takeaways. The first one is that there is indeed an effect that immigrants have on the location choices of firms: If a firm was going to choose a state within the U.S., it was much more likely to choose a state that had more, rather than fewer, immigrants from its home country.

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Originally Published May 14, 2014, by Knowledge@Wharton.