How ties to ethnic communities influence global firm expansion

As banks expand overseas, the demographics of expats and ethnic kin overseas is a strategic consideration, where business leaders expect the nature of a shared culture to ensure a customer base. Wharton management professor Exequiel (Zeke) Hernandez studied the global expansion and ethnic communities in the banking industry for his paper, “When Do Ethnic Communities Affect Foreign Location Choice? Dual Entry Strategies of Korean Banks in China.

In a discussion with Knowledge@Wharton, Hernandez outlines why this demographic specificity is beneficial to global businesses, but also when it could lead to untapped market potential within the larger population.

“For firms it offers a rule of thumb to determine when it’s actually valuable to rely on an immigrant population as a platform for foreign expansion,” explains Hernandez. With social enforcement, communities have bonds based on its common nationality and a reputation in that community. In studying this trend, Hernandez summarizes why a firm might take the risk of limiting their growth in a foreign location by catering to a small ethnic population.

Read more at Knowledge@Wharton.