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How Do Family, Insider, and Institutional Shareholder Perceive Institutional Risks in Foreign Market Entry? Evidence from Newly Industrialized Economy Firms

Emerging Market Firms in the Global Economy

ISBN: 978-1-78441-066-7, eISBN: 978-1-78441-065-0

Publication date: 11 November 2014

Abstract

Purpose

This research seeks to understand how shareholder constituencies including controlling family, nonfamily insiders, as well as domestic and foreign institutions in the corporate governance system of emerging economy firms perceive institutional risks in terms of regulative, normative, and cognitive institutions and influence strategic choices in the internationalization of their invested firms.

Design/methodology/approach

The sample data are Taiwanese publicly listed companies in the electronics and computer industry. Panel data of the parent firms and their overseas affiliates are available from the annual report and Taiwan Economic Journal database. Country-level data are available from the World Investment Report and the IMD World Competitiveness Report. Statistical regression models including tobit and logistic regression are used to analyze the data.

Findings

Controlling family and nonfamily insider shareholders tend to influence their invested firms to enter in institutionally smaller host countries through a shared ownership. Domestic institutional shareholders tend to influence their invested firms to adopt a shared ownership and enter in host countries with larger and smaller institutional distances in terms of regulative and normative institution, respectively. Foreign institutional shareholders tend to influence their invested firms to enter in institutionally smaller host countries through a whole ownership.

Originality/value

The strategic choices of foreign market entry made by emerging economy firms are significantly shaped by the different risk perceptions of shareholder constituencies in their corporate governance system toward the institutional distances between the home and the host country.

Keywords

Acknowledgements

Acknowledgments

This research project was supported by the grant from European Union’s Erasmus Mundus (Grant No. FIIR2011/14) and Zhejiang Provincial Natural Science Foundation of China (Grant No. LY12G02011).

Citation

Kittilaksanawong, W. (2014), "How Do Family, Insider, and Institutional Shareholder Perceive Institutional Risks in Foreign Market Entry? Evidence from Newly Industrialized Economy Firms", Emerging Market Firms in the Global Economy (International Finance Review, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 279-306. https://doi.org/10.1108/S1569-376720140000015012

Publisher

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Emerald Group Publishing Limited