Effects of the host-country institutional environment on the operation mode change of international construction enterprises

Abstract

PurposeThe operation mode of enterprises will affect its resource commitment in the host country, involving different costs and time, as well as risks. Yet, the current state of knowledge about how the institutional environment affects the operation mode change of international construction enterprises is equivocal. This study aims to explore the impact of a host country's institutional environment on the operation mode change of international construction enterprises.Design/methodology/approachFirst, this study proposes a model on the impact of the institutional environment on the operation mode change of international construction enterprises. Second, this study used the Worldwide Governance Indicators (WGI) published by the World Bank and a questionnaire survey to collect data. Finally, the study employs a multiple regression methodology to test the hypothesis and discusses the results.FindingsResults highlight that the important impact of the institutional environment on the operation mode change of international construction enterprises. The results showed that enterprises are more willing to increase resource commitments under the condition of stable institutional environment. In addition, enterprises' market-specific experience and general international experience, as moderating variables, weaken the impact of the institutional environment on the operation mode change. However, general international experience has no significant moderating effect.Practical implicationsThe findings of this study provide practical implications for the investment risk assessment of international construction enterprises. Enterprises need to consider the change in institutional quality and institutional instability of the host country, as well as their own international experience when changing operation mode.Originality/valueThis study extends internationalization theory to the international construction field and provided theoretical guidance for the mechanism of operation mode change of international construction enterprises.