Escaping from institutional weakness by EM-MNEs: the role of firms’ resources vulnerability

Abstract

PurposeHow does emerging market multinational enterprises’ (EM MNEs) resource vulnerability to domestic institutional weakness influence the escapist outward foreign direct investment (OFDI)? This study aims to focus on how varying qualities of technological resources make EM MNEs vulnerable to institutional weakness at home and when such a vulnerability triggers escapist OFDI.Design/methodology/approachA mix of primary and secondary data is used to study evidence of escapist OFDI in the case of multilatinas. Structural equation modelling and hierarchical regressions were applied to test the hypotheses.FindingsDomestic institutional weakness triggers escapist OFDI only when EM MNEs’ resources are vulnerable to institutional pressures. Technological leadership increases the vulnerability of EM MNEs to the pressure of institutional weaknesses at home, which, in turn, motivates escapist OFDI.Originality/valueIn discussing the role of firm resources and their vulnerability to institutional weakness, a mechanism is proposed to shed light on how EM MNEs transform the general country framework of the institutional environment into the specific decision to escape via OFDI.