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

Abstract

Drawing upon theories of agglomeration economics, institutional ecology and social networks, we develop a network-based theory of international agglomeration and foreign market entry performance. An international agglomeration is defined as, a foreign peer network (FPN), 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 FPN develops through four stages in the host country and such development stages partly explain variations in foreign entry performance.