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Article
Publication date: 17 May 2022

Yang Yang, Jia Xu, Jonathan P. Allen and Xiaohua Yang

This study examines the impact of formal and informal institutional distances on the foreign ownership strategies of emerging market firms (EMFs).

Abstract

Purpose

This study examines the impact of formal and informal institutional distances on the foreign ownership strategies of emerging market firms (EMFs).

Design/methodology/approach

This is an empirical study relying on two sets of data collected over two time periods, 2006–2008 and 2017–2019, for publicly-listed Chinese companies.

Findings

Greater formal institutional distances in the host and home countries make EMFs less likely to use joint ventures (JVs), while greater informal distances make EMFs more likely to use the JVs. When both formal and informal institutional distances are high, the use of JVs is more likely. These results are affected by the goal of the foreign direct investment (FDI) project, with strategic asset-seeking (SAS) FDI projects favoring the use of wholly owned subsidiaries (WOSs).

Research limitations/implications

This study relies on cross-sectional data from publicly-listed Chinese companies, which may limit the generalizability of the findings.

Practical implications

EMFs investing in advanced countries should carefully assess the tradeoffs between transactional cost efficiency and legitimacy in making their foreign ownership decisions. If the goal is to access strategic assets, EMFs should consider WOSs to ensure the transfer of strategic assets and create value for the parent company.

Originality/value

The findings show that formal and informal distances between institutions have different impacts on foreign ownership strategies, providing empirical evidence for the need to balance conflicting cost-efficiency and legitimacy considerations when businesses make such strategic decisions. The authors show how this balance depends on the goal of the FDI project.

Details

International Journal of Emerging Markets, vol. 18 no. 12
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 3 February 2022

I-Fan Yen, Hsin Mei Lin and Yi-Tien Shih

The literature on foreignness has, to date, stressed the liability of foreignness (LOF) and the advantage of foreignness (AOF). Drawing on industrial organisation theory…

Abstract

Purpose

The literature on foreignness has, to date, stressed the liability of foreignness (LOF) and the advantage of foreignness (AOF). Drawing on industrial organisation theory, institutional theory, the resource-based view of the firm and the literature on networking, the authors’ research develops an integrated framework to explore the impact of foreignness on internationalisation depth from the perspective of the duality of foreignness (LOF versus AOF) within multiple dimensions. These dimensions are isomorphism, home country of origin, institutional distance and dual embeddedness of multinational enterprises (MNEs).

Design/methodology/approach

In this study, the authors empirically test hypotheses arising from this new theoretical framework by examining the characteristics of a sample of 324 Chinese MNEs (CMNEs) that were operating in 63 countries from 1999 to 2018. Employing regression analysis on a panel of 9,410 observations, the results show that foreignness does exhibit multilevel complexity and duality.

Findings

The authors’ empirical results show that isomorphism pressures, country of origin and institutional distance have a negative effect on internationalisation depth (as an outcome of LOF) but that dual embeddedness, on the part of MNEs, exerts a positive impact on internationalisation depth (as an outcome of AOF). The implications for research on multilevel complexity and the duality of foreignness are discussed, and managerial implications are outlined.

Research limitations/implications

The implications of the authors’ findings for MNEs should not be generalised to developed countries without examining the characteristics of both China as an emerging country and its MNEs. The second limit is regarding ownership; this framework has limitations due to choosing China and its OFDIs for testing internationalisation depth. Finally, for subsequent research, examining the dynamics of foreignness completes the nature of multicomplexity, defined by external and internal factors of foreignness changing over time and space.

Practical implications

CMNE managers are advised to actively scrutinise their behaviours in the local country to overcome the differences in routines, values and practices inherent in local institutions (Chen et al., 2019). The results imply that CMNEs should be careful not to overuse their home country image when penetrating a new market. Thus, a strategy to reduce a home government's hegemonic or otherwise negative image may be wise when operating abroad. Finally, the authors’ model suggests that CMNEs equipped with great RCN CIPs for identifying, scanning and interpreting local institutions can enhance internationalisation depth.

Originality/value

The authors’ research contributes to research on foreignness by emphasising foreignness as a construct of multilevel complexity. The authors argue that foreignness arises due to varying factors at the host, home, host-home levels and at the level of the organisational entity. The authors’ definition of foreignness and empirical results supports the notion that isomorphism pressures (host country-level factors), country-of-origin of home country (home country-level factors) and institutional distance (host-home country-level factors) are inextricably negatively linked with internationalisation depth (as effects of LOF). By contrast, the dual embeddedness of MNEs (the factor of organisational level) represents a positive relationship with internationalisation depth (as effects of AOF).

Details

International Journal of Emerging Markets, vol. 18 no. 11
Type: Research Article
ISSN: 1746-8809

Keywords

Book part
Publication date: 1 May 2023

Haoyu Gao, Ruixiang Jiang, Wei Liu, Junbo Wang and Chunchi Wu

This chapter investigates the effect of the geographical distance between institutional investors and firms on managers' financial misconduct. The evidence shows that the…

Abstract

This chapter investigates the effect of the geographical distance between institutional investors and firms on managers' financial misconduct. The evidence shows that the likelihood of committing financial misconduct by management is positively associated with distance. The distance effect is more prominent for firms with higher information asymmetry and more dedicated institutional investors. In line with the balance between risk-taking and benefit extraction from misconduct, the severity of financial misconduct is higher for firms closer to their institutional investors. Results show that geographical proximity can significantly reduce the cost of information production and facilitate monitoring through access to soft information.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-80382-401-7

Keywords

Article
Publication date: 9 September 2021

Diego Quer and Rosario Andreu

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

International Journal of Emerging Markets, vol. 18 no. 9
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 13 July 2023

Ying Zhang and Cong Cheng

This study seeks to explore the relationship between performance relative to aspiration and SMEs' internationalization speed, and moderating effects of top management's policy…

Abstract

Purpose

This study seeks to explore the relationship between performance relative to aspiration and SMEs' internationalization speed, and moderating effects of top management's policy knowledge and institutional distance between the above relation.

Design/methodology/approach

This study tests the authors’ hypotheses using data on Chinese manufacturing SMEs over a 5-year period from 2013 to 2017. The authors leverage archival panel data on publicly listed companies on the SME Board, GEM and New OTC Market in the Shanghai and Shenzhen Stock Exchanges. The authors then collected data from the WIND and ZEPHYR databases.

Findings

The results confirm a U-shaped relation between performance relative to aspiration and SMEs' internationalization speed, and show that this relation is steepening by top management's policy knowledge in home country but flattening by institutional distance as environmental dynamics.

Originality/value

The study findings contribute to the international business field by exploring how a firm's risk situation in internationalization can change, thereby influencing SMEs' international expansion.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 3 August 2022

Ping Lv, Jakob Arnoldi and Anders Ryom Villadsen

This study aims to investigate whether and why multinational corporations (MNCs) seek to reduce institutional costs of foreign direct investments (FDIs) by aligning with…

Abstract

Purpose

This study aims to investigate whether and why multinational corporations (MNCs) seek to reduce institutional costs of foreign direct investments (FDIs) by aligning with transnational political frameworks.

Design/methodology/approach

This study uses the Chinese Belt and Road Initiative (BRI) to test whether MNCs’ subsidiaries in China increase FDI into BRI-affiliated countries after the BRI’s launch. This study compares FDIs by Chinese subsidiaries of foreign MNCs in the year before and two years after the BRI’s announcement. Hypotheses are tested for two explanations of why foreign MNCs seek to exploit the BRI.

Findings

Investments into BRI-affiliated countries increased after the announcement of the BRI, and this increase is positively moderated by institutional distance between the MNC home country and the BRI-affiliated target country. This shows that the greater the institutional costs of investing in a BRI-affiliated country, the more responsive the MNCs’ Chinese subsidiary will be to the BRI.

Research limitations/implications

This study demonstrates that MNCs respond to transnational political frameworks. This study only studies the immediate response because the BRI is an infrastructure project. Better infrastructure will, over time, lead to more investments; however, the immediate response is due not to infrastructure but political structure.

Originality/value

The results show how MNCs use transnational political frameworks. The idea that MNCs can channel FDI through existing subsidiaries for this purpose has not previously been discussed in the literature.

Details

Chinese Management Studies, vol. 17 no. 5
Type: Research Article
ISSN: 1750-614X

Keywords

Article
Publication date: 15 October 2021

Yi She, Jin Hong and Chuwei Ji

This study examines the impact of outward foreign direct investment (OFDI) of Chinese multinational corporations (MNCs) and formal and informal institutional distances between the…

Abstract

Purpose

This study examines the impact of outward foreign direct investment (OFDI) of Chinese multinational corporations (MNCs) and formal and informal institutional distances between the home and host countries on the innovation performance of parent company.

Design/methodology/approach

This study uses panel data to conduct an empirical analysis on the data of 59 mature Chinese MNCs and their 872 overseas subsidiaries over the past 11 years and draws interesting results.

Findings

Results show that OFDI and formal and informal institutional distances between countries exert a significant positive impact on the innovation performance of the parent company and formal and informal institutional distances negatively moderate the impact between OFDI and the parent company's innovation performance.

Originality/value

Although international business research pays increasing attention to transnational differences in institutions and cultures, research on the relationship between technology spillover and distance is relatively limited. In addition, few studies consider the impact of FID and IFID on transnational reverse knowledge spillovers. This research fills these research gaps, and the conclusions have certain practical significance for multinational companies.

Details

European Journal of Innovation Management, vol. 26 no. 3
Type: Research Article
ISSN: 1460-1060

Keywords

Article
Publication date: 6 October 2023

Junying Liu, Ying Wang and Xueyao Du

Foreign construction subsidiaries play an important role in the global construction market. How to establish and maintain long-term sustainable performance has attracted increased…

Abstract

Purpose

Foreign construction subsidiaries play an important role in the global construction market. How to establish and maintain long-term sustainable performance has attracted increased attention, but only a few studies have considered this issue. The purpose of this study is to explore the relationship between autonomy and the sustainable performance of subsidiaries and to provide support for their management control modes.

Design/methodology/approach

From an institutional logics perspective, empirical research using a questionnaire survey was conducted following the methodological framework of this study. Relevant data were collected from 106 experienced managers of foreign construction subsidiaries, and the hypotheses were tested through a regression model.

Findings

The results show that foreign construction subsidiaries have a high degree of operational autonomy, which tends to strengthen their embeddedness in the host country and improve their sustainable performance. However, the role of strategic autonomy is not found to be significant. The moderation results show that the positive impact between operational autonomy and external network embeddedness is strengthened by institutional distance. Institutional distance has no significant moderating impact on the relationship between strategic autonomy and external network embeddedness, respectively.

Research limitations/implications

Geographical limitations may exist as the survey is focused on the Chinese construction foreign subsidiaries. However, based on an institutional logics perspective, this study discusses the management control mode of foreign subsidiaries, which enriches the antecedents of sustainable performance and can provide an in-depth explanation of the effects of the organizational strategies of multinational construction enterprises.

Practical implications

This study provides beneficial information for the sustainable performance of foreign construction subsidiaries. It will provide detailed guidance to managers located in different institutional environments on optimally promoting the sustainable development of subsidiaries.

Originality/value

This study identifies autonomy as an important antecedent, making it one of the first studies investigating autonomy on the sustainable performance of foreign construction subsidiaries. The findings of this study can contribute to the construction subsidiaries' sustainable performance literature and provide novel, comprehensive knowledge for academia and practice.

Details

Engineering, Construction and Architectural Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 29 June 2023

Alvar Castello Esquerdo, Andrei Panibratov and Daria Klishevich

Drawn from the push–pull perspective, this research aims to identify the determinants of Chinese technology's outward foreign direct investments (OFDI) into the Eurasian region.

Abstract

Purpose

Drawn from the push–pull perspective, this research aims to identify the determinants of Chinese technology's outward foreign direct investments (OFDI) into the Eurasian region.

Design/methodology/approach

The authors argue that contrary to the extant literature, technology-driven OFDI from emerging-market multinationals (EMNEs) do not always seek developed countries, and EMNEs' technology investments in emerging economies are rising indicating that there are factors in these economies that can prove attractive. The authors recognize the influence of the macroeconomic environment and the interaction of home and host-country institutional contexts that influence the location choice of EMNEs technology-driven OFDI into other emerging economies, mediated by the industry sector and firm's ownership structure. The authors test our hypotheses using a sample of 1,656 observations of Chinese MNEs' tech-investments in the Eurasian region from 2005 to 2019.

Findings

The study results indicate that bilateral diplomatic relations pave the way of the host-country institutional environment for Chinese MNEs uncovering the role of the Chinese government as an OFDI facilitator. This study also unveils a lower technology level of the Chinese MNEs' investments in the Eurasian region connoting an interest in market opportunities exploitation through their existing technologies – through its comparative advantage in the global markets – rather than strategic assets acquisition aiming at augmenting their technological capabilities. This trend is similar to that of other major foreign direct investment (FDI) source countries.

Originality/value

This research contributes to a better understanding of the characteristics and the location choice of technology investments from EMNEs into other emerging economies that have received scant attention in the literature. In addition, it extends the institutional theory by analyzing how home-country institutions, through bilateral diplomatic relations, may smooth the host country institutional environment for home-country MNEs' foreign investments and contributes as well to the debate on the applicability of the existing theoretical framework in the case of emerging-market MNEs.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 23 January 2024

Anuradha Saikia, Sharad Nath Bhattacharya and Rohit Dwivedi

This study reviews the literature on institutional theory in international business and examines the institutional factors behind the success or failure of multinational…

Abstract

Purpose

This study reviews the literature on institutional theory in international business and examines the institutional factors behind the success or failure of multinational corporations (MNCs) in emerging markets.

Design/methodology/approach

This systematic literature review analysed 116 peer-reviewed articles published in leading journals between 2005 and 2022. The R package Bibliometrix and VOSviewer visualization software were used for analysis. A hybrid methodology combining bibliometric and content analyses was utilized to obtain a descriptive evaluation of the publication impact along with a keyword co-occurrence map, context-specific institutional effects and subsidiary strategies.

Findings

The Journal of International Business Studies, along with influential authors such as Mike W. Peng, Klaus Meyer, and Mehmet Demirbag, have taken the lead in advancing institutional theories for MNC internationalization in emerging markets. The clusters from the co-word analysis revealed dominant MNC entry modes, institutional distances and MNC localization strategies. The content analysis highlights how the institutional environment is operationalized across the macro-, micro- and meso-institutional contexts and how the MNC subsidiary responds in emerging markets. Meso-level interactions emphasize the relational aspects of business strategies in emerging markets.

Practical implications

Contextualizing subsidiary strategies and institutional forms can help managers align their strategic responses to the dynamic relationship between subsidiaries and the institutional environment. The review findings will enable policymakers to simplify regulatory policies and encourage MNC subsidiary networks with local stakeholders in emerging markets.

Social implications

Legitimacy strategies such as corporate community involvement in emerging markets are crucial for enhancing societal support and removing stakeholders' scepticism for MNC business operations in emerging markets. Moral legitimacy should be implemented by managers, such as lending support to disaster management efforts and humanitarian crises, as they expand to new business environments of emerging markets.

Originality/value

This study is the first to explore institutional diversity and subsidiary strategic responses in a three-layered institutional context. The findings highlight the relevance of contextualizing institutional perspectives for international business scholars and practitioners as they help build context-specific theoretical frameworks and business strategies. Future research recommendations are suggested in the macro-, micro- and meso-institutional contexts.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

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