The rules of global engagement for developing country firms

Abstract

Purpose

This study aims to examine how property rights, financial liberalization and the control of corruption at the country level influence the inward and outward global engagement of domestic firms from developing countries. The author also examines whether firms with certain resource endowments such as human capital or technological capabilities are better positioned to globalize as the aforementioned institutional factors evolve.

Design/methodology/approach

Using a sample of 18,365 firms from 57 developing countries and multilevel modeling, the author shows that institutional factors are related to inward and outward global engagement.

Findings

The author finds that firms with human capital are more likely to move outward in the presence of lower levels of corruption. Domestic firms possessing technological capabilities are more likely to engage inward as financial liberalization eases the access to capital.

Originality/value

Many existing studies that have investigated the impact of institutional factors on internationalization by developing country firms have bundled different institutions together therefore sacrificing a focus on the effect of specific institutions on these firm decisions. While the author knows that institutions matter for developing country firm globalization, there is limited research on which institutions matter. There is also a debate on how institutions matter for developing country firms. The study sheds light on these aspects. The author also uses hierarchical linear modelling and uses both country- and firm-level variables.

Citation

Ketkar, S. (2014), "The rules of global engagement for developing country firms", Competitiveness Review, Vol. 24 No. 2, pp. 124-146. https://doi.org/10.1108/CR-12-2012-0033