A path to value creation for foreign entrepreneurs
© 2015 John Wiley & Sons, Ltd. Research summary: Firms founded by foreign entrepreneurs constitute an influential and growing part of the world economy. Yet, the existing research has given little consideration to the strategies of foreign entrepreneurs beyond their decisions to start a firm. In this article, we address this gap by examining how foreign entrepreneurs may bring value to their firms as firm managers. We argue that foreign owner-managers may benefit their firms by having access to home-country resources. We demonstrate that, compared to hired local managers, foreign owner-managers reduce firms' operating costs by disproportionately hiring home-country labor when this labor is more cost-efficient. This effect is larger for labor-intensive industries and for entrepreneurs from less wealthy countries. Managerial summary: Foreign entrepreneurs represent an important part of the world economy. Yet, we know little of how foreign entrepreneurs manage their firms. In this article, we examine whether foreign entrepreneurs and domestic managers hire different employees. We find that when foreign entrepreneurs manage their firms personally, they hire a larger number of foreign workers, and such workers are cheaper and more productive than the local labor. Conversely, domestic managers tend to hire local employees, despite their higher relative wages. Foreign owner-managers are particularly valuable in labor-intensive industries and when their home-country labor is inexpensive.
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