Local clusters of SOEs, POEs, and FIEs, international experience, and the performance of foreign firms operating in emerging economies

Drawing on the institutional perspective, this study provides an empirical framework for analyzing how clusters within local institutional environments, along with experience derived from international environments, influence the performance of foreign firms operating in emerging economies. Analyzing a sample of 943 Taiwanese manufacturing firms investing in China, this study found that choosing to locate in proximity to a cluster of privately owned enterprises (POEs) has a U-shaped relationship with the performance of foreign firms, and that choosing to locate close to a cluster of foreign-invested enterprises (FIEs) from the same home country has an inverted U-shaped relationship with the performance of foreign firms. However, choosing to locate within a cluster of state-owned enterprises (SOEs) has no significant effect. Further analysis confirms that the positive impact of a business group's international experience in a less developed country is greater than that of a business group's international experience in a developed country.