When do firms choose global cities as foreign investment locations within countries? The roles of contextual distance, knowledge intensity, and target-country experience
Helen S. Du and
Journal of World Business, 2020, vol. 55, issue 1
Foreign investors generally need to overcome a liability of foreignness stemming from contextual distance between their home country and the target country. We argue that they can limit that liability more easily by investing in a global city rather than elsewhere in the target country. Accordingly, we hypothesize that the contextual distance to a target country has a positive effect on a firm’s propensity to invest in a global city in that country. We also predict that this effect is stronger for investments in knowledge-intensive activities and weaker for investors with more target-country experience in general and target-country experience in global cities in particular. Our hypotheses receive considerable support in an analysis of 11,748 foreign greenfield investments by 1025 manufacturing and service firms during 2008–2012. Our findings suggest that global cities are superior subnational locations for gathering contextual knowledge about target countries and limiting the liability of foreignness.
Keywords: Contextual distance; Global cities; Knowledge-intensive activities; Liability of foreignness; Location decisions; Target-country experience (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: When do firms choose global cities as foreign investment locations within countries? The roles of contextual distance, knowledge intensity, and target-country experience (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:worbus:v:55:y:2020:i:1:s1090951618306473
Ordering information: This journal article can be ordered from
http://www.elsevier. ... 620401/bibliographic
Access Statistics for this article
Journal of World Business is currently edited by David Collings and Jonathan Doh
More articles in Journal of World Business from Elsevier
Bibliographic data for series maintained by Catherine Liu ().