Exequiel Hernandez

Finding a home away from home: : effects of immigrants on firms' foreign location choice and performance

Using data from a sample of foreign subsidiaries established in the U.S. by firms from 27 countries between 1998 and 2003, this study examines the relationship between immigrants and the foreign expansion of organizations from their home countries. I propose that common country bonds to immigrants can become unique channels of knowledge, providing firms with idiosyncratic benefits in foreign places. Such connections to co-national immigrants should positively influence location choice and survival through processes of local learning and knowledge transfer. The results support these predictions. The probability of locating operations and surviving in a state increases with the concentration of same-nationality immigrants in that state, but not with the presence of immigrants of other nationalities. To highlight the knowledge-related mechanisms, I show that these relationships are particularly strong for firms lacking prior experience in the country, for locations in which immigrants can help firms capitalize on industry-specific knowledge spillovers, and for firms with highly knowledge-intensive operations.

Networks and Innovation: Accounting for Structural and Institutional Sources of Recombination in Brokerage Triads

Research linking interorganizational networks to innovation has focused on spanning structural boundaries as a means of knowledge recombination. Increasingly, firms also partner across institutional boundaries (countries, industries, technologies) in their search for new knowledge. When both structural and institutional separation affect knowledge recombination, aggregate characterizations of ego network attributes mask distinct recombination processes that lead to distinct types of innovation outcomes. We address this issue by focusing on triads as the locus of recombination in networks. We partition firms’ networks into three configurations of open triads—foreign, domestic, and mixed—based on the distribution of the broker and its partners across or within institutional boundaries. We argue that each configuration embodies distinct recombination processes, with foreign triads offering high access to novel knowledge, domestic triads facilitating relatively efficient knowledge integration, and mixed triads balancing the two. We apply this approach to a global research and development alliance network in the biotechnology industry, using countries as institutional boundaries. The results show that domestic triads affect innovation volume (i.e., the productivity of innovation) more strongly than mixed or foreign triads. In contrast, foreign triads have a greater impact on innovation radicalness (i.e., the path-breaking nature of the innovation) than mixed or domestic triads. The findings suggest that different brokerage configurations embody unique recombination processes, leading to distinct innovation outcomes. Our research provides a deeper understanding of how networks and institutions jointly influence distinct aspects of innovation.

Acquisitions, Node Collapse, and Network Revolution

We explore a novel mechanism of network change that occurs when a firm acquires another one and inherits its network ties. Such “node collapse” can radically restructure the network in one transaction, constituting a revolutionary change compared with the incremental effect of tie additions and deletions, which have been the focus of prior research. We explore several properties of node collapses: their efficacy in helping firms achieve superior network positions, the externalities they impose on other network actors, and how they provide exclusive control over both internal and network resources. Using a simulation in which actors compete to acquire one another, we model network dynamics driven by node collapses. We find that node collapses directly affect the performance of the acquirer and indirectly that of other actors, and that the direction of network evolution hinges on the degree to which firms pursue internal versus network synergies through node collapses. This paper was accepted by Olav Sorens...

Immigrants and Firm Performance: Effects on Foreign Subsidiaries versus Foreign Entrepreneurial Firms

Studies have demonstrated that foreign firms locate where immigrants from their home countries reside and suggested that doing so can improve performance. We argue that, to properly assess how immigrants impact the performance of co-national firms, research must account for heterogeneity in how independent foreign entrants (owned by individual foreigners) versus MNC subsidiaries (owned by a foreign corporate parent) benefit from immigrant communities. Independent entrants have a greater need for resources from the immigrant community and depend more on their individual managers’ personal connections within the community to obtain such resources. Subsidiaries of MNCs can instead rely on the impersonal organizational resources of their parent firm (e.g. brand, reputation, channels) to access valuable immigrant community resources. Using data on foreign firms in Russia during 2006-2011, we find that immigrants improve the profitability of co-national independent firms only if they are managed by immigrant CEOs, whereas co-national MNC subsidiaries profit from immigrants regardless of their CEO’s nationality. Our study suggests that while organizations benefit from the resources of co-national immigrant communities in foreign markets, the means by which they activate them—personal or impersonal—systematically vary across different types of firms.Prior studies have demonstrated that foreign firms co-locate with immigrants from their home countries, but whether this improves profitability is unclear. We demonstrate that co-national immigrant communities positively affect the performance of foreign firms, and that this effect depends on the type of firm (entrepreneurial venture or MNC subsidiary) and manager (foreign versus local). We found that without an immigrant community, a foreign CEO has a negative effect on the performance of foreign entrepreneurial firms. However, this effect becomes positive as the size of the immigrant community increases because entrepreneurial firms with foreign managers benefit more from their co-national communities than similar firms with local managers. Conversely, MNC subsidiaries derive equal benefits from co-locating with immigrants regardless of their CEO’s nationality. This is consistent with our expectation that entrepreneurial firms rely more on local communities than subsidiaries and that CEOs’ social networks allow entrepreneurial firms to relate to these communities.

Liberty in Law? Intellectual Property Rights and Global Alliance Networks

Do formal legal institutions complement or substitute social network mechanisms of knowledge protection? We explore how the composition and structure of firms’ international alliance networks changes in response to the passage of intellectual property rights (IPR) laws in their home countries. We find that, when IPR laws are strengthened, firms form more international alliances, particularly if they operate in IP intensive industries, and do so with partners from a greater diversity of countries. The significance of status (centrality) as a predictor of international alliance formation decreased after the passage of IPR laws, in line with a substitution effect that ‘democratized’ access to the global network by increasing the participation of firms that were peripheral before the legal changes. In contrast, the closure of firms’ alliance networks increased with stronger IPR laws, in line with a complementarity effect that increased the use of social control. The increase in closure was strongest in the networks of the low status entrants into the global network. Using a difference-indifference empirical design, we found that these changes coincided exactly with the timing of the passage of the laws across thirteen countries between 1988 and 2005. This study addresses issues of great theoretical and practical importance to the literatures on institutions, networks, and IPR.