2005/11/01 by Sarah Y. Tong · 3 citations
Business, Management and Accounting · Economics, Econometrics and Finance · Social Sciences · #International Business and FDI #Global trade and economics #Migration, Ethnicity, and Economy #Ethnic group #Foreign direct investment #Bureaucracy #China #Investment (military) #Ethnic chinese #Product (mathematics) #Quality (philosophy) #Development economics #Developing country #Convergence (economics) #Gravity model of trade #Economics #Business #Demographic economics #Economic growth #International economics #Political science #Macroeconomics
paper · doi:10.1111/j.1467-9361.2005.00294.x
openalex publication_date 2005/11/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/30
Abstract Ethnic Chinese entrepreneurs are known for their active business networking practices, particularly in Southeast Asia. This paper empirically investigates the role of ethnic Chinese networks in promoting foreign direct investment (FDI). We further evaluate whether the effectiveness of networking activities are affected by the level of economic and institutional development of the source and the host countries. Using a standard gravity model, we find that ethnic Chinese networks are significant in facilitating cross‐border investment between countries. The strength of ethnic Chinese networks between country pairs, approximated by the product of the numbers of ethnic Chinese in both countries, is positively correlated with the cumulative amount of their reciprocal FDI. More importantly, this significant relationship is not limited to countries in Southeast Asia, but is applicable to other country pairs included in the study as well, regardless of whether the investment is originated from industrial countries or developing economies. Finally, the analysis finds no evidence that ethnic networks are only effective in countries where economic and legal institutions are under‐developed. Ethnic Chinese networks have played a significant role in promoting FDI to countries with a relatively higher bureaucratic quality, much more so than to countries with a lower bureaucratic quality.