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The purpose of the paper is to examine the role of institutional distance as a determinant of outward foreign direct investment (OFDI) from India. The study combines a nuanced view of institutional distance, with traditional location factors to analyze Indian OFDI flows to developed and emerging economies (EEs) during the period 2009 to 2017.

The paper employs fixed effects panel regression model on an unbalanced panel data set.

The findings suggest that India's OFDI is undeterred by the isomorphic pressures caused by regulatory and normative institutional distance, but cognitive institutional distance acts as a deterrent in developed economies. Indian MNEs engage in institutional arbitrage as they simultaneously engage in strategies of institutional escapism and institutional exploitation. The study also finds that emerging economies have emerged as an important destination for strategic asset seeking FDI, in addition to developed economies.

The findings of the study present important implications for policymakers and corporate managers. For policymakers, the study points toward the need for improving the general business environment at home to prevent escapist OFDI and trade enhancement as a tool to overcome cognitive barriers and behavioristic stereotypes. For corporate managers, the study's findings underline the importance of adopting different strategies for dealing with different isomorphic pressures in developed and emerging economies.

The study adds value to the sparse literature using the IBV in the emerging markets context, to supplement and enrich existing theoretical frameworks. It is a pioneering study in its use of institutional distance as an explanatory factor for Indian OFDI and provides evidence of institutional arbitrage.

The purpose of this paper is to examine whether subnational market-supporting institutions in Indian states affect the likelihood of Indian multinational enterprises (MNEs) to undertake acquisitions in advanced economies (AEs) rather than emerging economies (EEs) and, if so, which mechanism – institutional fostering or escapism – underlies the phenomenon.

The paper uses a logistic regression model on a dataset of 647 firm-level cross-border acquisitions (CBAs) undertaken by Indian MNEs during the period 2010–2016.

The paper finds support for the institutional escapism mechanism, as opposed to the institutional fostering mechanism, underlying Indian MNEs’ acquisitions in AEs (rather than EEs). That is, firms headquartered in Indian states where market-supporting institutions (such as economic liberalization and efficiency of legal systems) are weak are more likely to undertake CBAs in AEs than in EEs as an escapist response to weak subnational institutions at home.

The paper highlights the relevance of the mainstream international business (IB) concept of emerging market multinational enterprises (EMNEs) internationalization to critical IB scholarship by examining subnational institutional influences on EMNEs’ foreign market choice between AEs and EEs. In particular, by providing evidence for the institutional escapism mechanism which has potential negative socioeconomic consequences in the region of the investing firm, the paper adds to critical IB research which places great emphasis on the examination of inequalities and draws attention to the EMNE context as a suitable setting for further research on internationalization from a critical perspective.

The purpose of this paper is to provide directions for advancing the research on determinants of outward foreign direct investment (FDI) from India.

The paper uses literature review as a method to identify a research gap in the literature on internationalization of Indian firms.

The synthesis of the theoretical debate and empirical studies conducted in context of EMNEs, with a particular focus on India and preliminary examination of data on cross-border acquisitions as well as institutions in India lead us to argue for the consideration of institutions at sub-national level (Indian states) in examining the determinants of outward FDI from India. The paper also proposes a conceptual framework relating to the mechanism through which institutions at the state level in India affect the propensity of firms to invest overseas.

Since the propositions are not tested empirically, the paper does not provide conclusive results.

In addition to providing the synthesis of the theoretical debate and empirical studies, paper is, to the best of author’s knowledge, the first one to present a conceptual framework relating institutions at sub-national level with the outward foreign direct investment from India.