Stronger Together : Country-of-Origin Agglomeration and MNE Location Choice in an Adverse Institutional Environment

Research suggests that multinational enterprises (MNEs) are attracted to locations with concentrated firms from the same home country to benefit from interactions with market forces, but it remains an open question whether such agglomeration facilitates MNEs’ interactions with nonmarket actors such as the host government. We submit that since country-of-origin agglomeration enables collective actions and creates collective gains, co-location with compatriot firms can help MNEs navigate an adverse institutional environment. In line with this reasoning, we hypothesize that MNEs are more attracted to locations with country-of-origin agglomeration when MNEs face an exogenous shock that increases their regulatory burden in the host country. Our analysis offers corroborative evidence. The study adds to research on agglomeration, institutional environment, and location strategy