The impact of internationally dispersed ethnic networks on foreign direct investments

This study examines the role internationally dispersed ethnic networks have on countries’ foreign investment stock by estimating a gravity model using cross sectional data from 2010. Although the study focusses mainly on the impact of ethnic Chinese networks, 86 ethnicities have been examined. Ethnic network strength between countries was measured by using a proxy variable, created by taking the product of two countries’ migrant population from a respective ethnicity. Using a Poisson Pseudo Maximum Likelihood estimation, the likely existence of 30 ethnic networks has been distinguished, with the South Korean network being the most impactful. The Chinese ethnic network ranks 23d in terms of its impact on FDI.