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.