Should Birds of a Feather Flock Together? Agglomeration by Nationality as a Constraint in International Expansion [AIB Insights Vol 15 No 3 (2015 Q3)]

National identity is an important magnetic force that draws individuals and organizations to co-locate in the same geographic areas in foreign countries, thus providing a fertile socio-economic context for relationship formation and other social exchanges. Whether the focus is on individuals such as Chinese immigrants in Metropolitan cities (Zhou & Logan, 1989) or organizations such as Korean firms in China (Guillén, 2002), numerous studies have examined the factors that result in agglomeration by nationality (Henisz & Delios, 2001) and its consequences (Hernandez, 2014). Most research on nationality-based agglomeration of individuals highlight that shared cultural backgrounds and languages provide immigrants with a familiar and comfortable environment like that of their home country when they relocate overseas (Edin, Fredriksson, & Åslund, 2003). Similarly, most research on firms agglomerated by nationality highlights the positive consequences of co-location such as the social capital and local knowledge residing in co-national immigrant communities (Hernandez, 2014) and easier communication and knowledge sharing among co-national firms (Miller, Thomas, Eden, & Hitt, 2008). Moving beyond the positive consequences of nationality-based agglomeration for firms in foreign markets, my dissertation emphasizes the negative consequences as well and shows that agglomeration by nationality, paradoxically, both enables and constrains the innovation activities of firms in foreign markets.