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Emerging-market multinational enterprises (MNEs) have pushed institutional factors to the cutting-edge of international business research. As for Chinese MNEs, the importance of institutions has been strengthened since the Chinese government launched the Belt and Road Initiative (BRI), which seeks to promote a comprehensive platform for cooperation among countries. This study aims to investigate the role played by the BRI as an institutional factor moderating the influence of other institution-, industry- and firm-specific factors on establishment mode choice by Chinese MNEs.

Drawing on the strategy tripod, a perspective claiming that a firm's strategies are the result of internal, industrial and institutional conditions, this study develops a number of hypotheses that are tested with data on 1,076 outward foreign direct investments (OFDIs) of Chinese MNEs between 2013 and 2021.

The results show that the BRI moderates the influence of both the firm's prior international acquisition experience and Chinese government's OFDI restrictions on the establishment by means of an acquisition. They also report that this moderating effect does not apply for acquisition experience in the host country nor institutional distance.

This study contributes to reinforce the importance of institutions as the third leg of a strategy tripod when explaining international behavior of Chinese MNEs. It also suggests that the BRI is a diplomatic tool that may act as a substitute for the firm's resources and may mitigate the negative influence of other external factors.

The Belt and Road Initiative (BRI), an ambitious plan led by the Chinese government aiming to reach a close integration between countries, is reshaping the global institutional landscape. Chinese state-owned enterprises (SOEs) play a leading role in the BRI and they usually follow an unconventional behavior derived from the institutional influence of their home government. Prior research reports that institutional distance between home and host countries has an impact on multinational enterprises’ (MNEs’) ownership level in their foreign subsidiaries. Therefore, our aim is to investigate how institutional distance, the BRI and state ownership affect Chinese tourism MNEs' ownership level in their cross-border acquisitions.

Drawing on the institutional theory, this study develops several hypotheses that are tested using a sample of Chinese MNEs from accommodation, travel agencies, transport and leisure/entertainment industries.

The results show that the idiosyncratic characteristics of being an emerging-market MNE belonging to a soft-service industry is associated with a positive relationship between institutional distance and a high ownership level in cross-border acquisitions. They also indicate that targeting a country included in the BRI and being an SOE negatively moderates that relationship.

This study extends institutional theory in the case of tourism firms from an emerging economy. It also addresses an under-research topic in the literature, namely, how the BRI is leading Chinese tourism MNEs to redesign their international strategies.

The existing research on institutional distance implicitly posits the monotonic effect of contextual differences on the multinational enterprise (MNE) behaviors (e.g. entry mode, research and development (R&D) investment and subsidiary reverse knowledge transfer). Namely, MNEs from the same home to the same host countries are thought to have homogenous perceptions on the institutional influences and thus behave similarly. However, the authors argue that MNEs, due to their different performance aspirations in host countries, will have heterogenous perceptions on such contextual influences and thereafter behave differently.

Drawing on the behavioral theory of the firm and employing a unique sample comprised of 140 Chinese MNEs' foreign direct investments (FDIs) in Taiwan in 2017, the authors developed and tested the hypotheses.

The authors found that the emerging-market MNEs' (EMNEs’) perceptions of higher local institutional difficulties will be strengthened when their local performances are below their aspiration levels, making them more risk-taking. Nevertheless, EMNEs' local experiences and local equity-based partnerships will mitigate such negative perceptions, mitigating their risk-taking orientation.

The empirical findings make contributes to the international business (IB) literature by extending knowledge on the determinants and conditions of the heterogeneity in EMNEs' behavioral orientations when in face of the same institutional distance. The authors also provide managerial implications by showing that EMNEs' firm-specific resources (i.e. local experience and local equity-based partnership) will alter their perceptions of local institutional difficulties, leading to different behavioral orientations.