Global City Investment: Unravelling the Impact of Immigrants and International Experience as Knowledge Sources

Foreign investors typically prefer global cities as locations for their foreign direct investments to mitigate liabilities of foreignness (LOF) when investing in a target country. This study posits that firms with access to immigrants from the target country and international experience are better equipped to mitigate these liabilities, making them less dependent on the LOF-reducing benefits of global cities and more inclined to invest outside global cities. Furthermore, we shed light on whether internal knowledge gained through international experience and external migrant knowledge function as complements or substitutes. We test our hypotheses by analyzing 2,591 investments made by MNEs from 20 different OECD home countries in 48 different target countries over a 13-year period from 2003 to 2015. The results demonstrate a positive influence of immigrants and international experience on a firm's likelihood to invest outside global cities. The data further indicate that the effect of immigrants on the probability to invest outside global cities is weaker for internationally experienced firms, suggesting a substitutive dynamic between external migrant knowledge and internal knowledge derived from first-hand experience.