Location Choices of Chinese Multinationals in Europe: The Role of Overseas Communities

Overseas Chinese communities are an important determinant in the location choice of
greenfield investments made by mainland Chinese multinational enterprises across
European regions. Conceptually embedded in a relational approach, this effect is shown
through an empirical analysis of an exhaustive set of investment projects across NUTS1 regions in 26 European countries for the period 2003-2010. When controlling for
endogeneity bias and the embeddedness of existing Chinese economic activity, we find
that the importance of overseas communities in the location choices of Chinese firms is
based on increased access to strategic information. Our results confirm that the
relationship between the size of an overseas Chinese community and the probability of
Chinese investment is stronger for communities hosting newer generations of Chinese
migrants; in addition, they partially corroborate that this relationship is stronger when the
education level of the community’s Chinese migrants is higher. Our findings are
particularly robust in the context of knowledge-intensive sectors and high value-added
functions.