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This paper examines whether and, if so, why source country heterogeneity exists in foreign direct investment. Using detailed Swedish matched employer‐employee data for the period from 1996 to 2009, we find statistical evidence that affiliate performance differs systematically across source countries. We then show that differences in foreign multinational enterprises' global management practices (estimated from the new firm‐level data from the World Management Survey) are an important determinant of productivity among foreign affiliates.