A Network-Based Theory of International Agglomeration and Foreign Entry Performance

Abstract

Drawing upon theories of agglomeration economics, industry organization, institutional ecology and social networks, we developed a network-based theory of international agglomeration and foreign market entry performance. An international agglomeration is defined as a peer network formed by a group of foreign subsidiaries that have the same country of origin and operate same or similar businesses within a common geographic boundary in the host country. We propose that driven by the interplay among institutional, social and economic forces, an agglomeration develops through four stages in the host country and the performance of the foreign subsidiaries are influenced by the development stage at which an MNE entered the foreign market.