Abstract
How does local policy environment shape firms’ geographic expansion strategy? Drawing on perspectives from institution-based view and political capability literature, we argue that the variance in firms’ geographic expansion strategies lies in their political capabilities shaped by local policy environment. Specifically, we investigate the interaction of two dimensions of local policy environment—home-host policy similarity and policy uncertainty. Based on a unique dataset linking local industrial policies and geographic expansion strategies of publicly listed firms in China from 1998 to 2018, we find that the increase in home-host policy similarity leads to greater likelihood for the headquarter to establish subsidiaries in the host location. In addition, firms located in home environment with greater policy uncertainty develop specific political capability to cope with an everchanging environment, thus reducing the reliance on similar policy environment when seeking for geographic expansion.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call