FDI on the move: cross-border M&A and migrant networks

Using data on Chinese outward direct investment and migrant stocks in 96 countries from 2003 to 2014, we find that migrant networks have a positive and significant impact on cross-border mergers and acquisitions (M&A), but not on greenfield investment. The migrant network effect is more pronounced for multinationals with less experience in the host country, especially for initial entrants that face greater firm, industry, and country-level information frictions. These results are robust to various estimation methods, including an instrumental variable approach that addresses potential endogeneity concerns. Our findings demonstrate the importance of knowledge spillovers from migrant networks to multinationals for facilitating entry into new markets.