Investigating Firm Heterogeneity in Country-of-Origin Cluster Location Choice Decisions

The existence of industry and country of origin agglomerations is well-established in the literature, yet it remains to be understood which firm-level characteristics drive their decisions regarding specific locations when investing in a foreign country. Focusing on origin clusters, we provide insight into the potential influence of the home country context and, in particular, the impact of firm-level factors---both investor- and investment-related---underlying heterogeneity in firms' location choice decisions (isolated, industry cluster, origin cluster). Our particular empirical context is that of emerging economy (Chinese) firms investing in advanced economies (Germany). Such firms typically confront particular disadvantages in their foreign direct investments due to their origin. Our results suggest that there are distinct structural and strategic characteristics that distinguish between firms’ agglomeration preferences. Collectively, our argument shifts the emphasis of the location choice decision beyond just where to locate towards with whom to collocate