Location Choices of Chinese Multinationals in Europe: The Role of Overseas Communities

Abstract

Overseas Chinese communities are an important determinant in the location choice of greenfield investments made by mainland Chinese multinational enterprises across European regions. Conceptually embedded in a relational approach, this effect is shown through an empirical analysis of an exhaustive set of investment projects across NUTS-1 regions in twenty-six European countries for the period 2003-2010. When controlling for endogeneity bias and the embeddedness of existing Chinese economic activity, we find that the importance of overseas communities in the location choices of Chinese firms is based on increased access to strategic information. Our results confirm that the relationship between the size of an overseas Chinese community and the probability of Chinese investment is stronger for communities hosting newer generations of Chinese migrants; in addition, they partially corroborate that this relationship is stronger when the education level of the community's Chinese migrants is higher. Our findings are particularly robust in the context of knowledgeintensive sectors and high value-added functions.

A geographic relational perspective on the internationalization of emerging market firms

“…Relational approaches have been used to explain various socio-economic and management issues, including innovation performance (Beugelsdijk, 2007;Floysand & Jakobsen, 2011), knowledge production (Faulconbridge, 2007), entrepreneurship (Yeung, 2009), and technology upgrading (Hansen, Fold, & Hansen, 2016). Studies using a relational lens empirically have covered a wide range of topics: foreign market entry (Gluckler, 2006), global value networks (Gluckler & Panitz, 2016), location choice (Karreman, Burger, & van Oort, 2017), dynamic interorganizational relations (Henderson & Alderson, 2016), and multilevel social ties and interactions (Brailly, 2016;Kemeny, Feldman, Ethridge, & Zoller, 2016).…”

“…Additionally, due to historical legacies and cultural discourses and narratives, EMFs that venture abroad are embedded within the pluralistic contexts where such internationalization arises (Mutch, 2016;Verbeke & Kano, 2015). For example, for internationalizing EMFs, their greenfield investments are likely to be tied to specific social ties and local contexts (Karreman et al, 2017), while M&A deals can be understood as multi-level networking, with the subsequent interorganizational links leading to information sharing between the acquired and acquiring firms and their local communities (Brailly, 2016).…”

“…We position the three relational building blocks as being well equipped to account for and then theorize about the influences that these factors have on EMF internationalization (see Table 4). Also, by clearly specifying operationalizable variables for quantification and empirical testing, a geographic relational perspective offers a theoretically distinctive and analytically tractable approach (Brailly, 2016;Gluckler & Panitz, 2016;Karreman et al, 2017;Kemeny et al, 2016).…”

“…This sense-making process (Balogun et al, 2014;Whittle et al, 2016) reshapes their organizational and institutional contexts . For instance, greenfield investments by an EMF are motivated not only by its resources, but also by its connections to specific social networks in local institutional contexts (Henderson & Alderson, 2016;Karreman et al, 2017). As nascent MNCs, EMFs initially lack outward-oriented business networks and intermediaries for gathering, analyzing, and disseminating intelligence about global markets (Casanova & Miroux, 2017;Li, Yi, & Cui, 2017).…”

“…As nascent MNCs, EMFs initially lack outward-oriented business networks and intermediaries for gathering, analyzing, and disseminating intelligence about global markets (Casanova & Miroux, 2017;Li, Yi, & Cui, 2017). When investing in locations connected to migrant communities and ethnicity-based social and business networks, EMFs can approach culturally astute individuals, who are able to interpret local idiosyncrasies and establish legitimacy for EMFs (Karreman et al, 2017).…”