Jurisdiction Shopping and Foreign Location Choice: The Role of Market and Nonmarket Experience in the European Solar Energy Industry

Panayiotis Georgallis,Nina Kondratenko,Joao Albino Pimentel

doi:10.2139/ssrn.3800790

Abstract

We investigate how industry-support policies targeted at specific sectors influence foreign investment location choices. We argue that firms engage in jurisdiction shopping, selecting to invest in countries with more generous policy support, but that this effect varies markedly across firms. Our theory suggests that firms’ nonmarket experience positively moderates the effect of policy support on location choice, while the moderating effect of market experience should be less impactful. We further argue that, depending on the nature of their nonmarket experience, firms may become less attracted to places with more generous policy support. We find support for our predictions by examining foreign investments of firms entering the solar energy industry in the EU during 2004-2013. We discuss implications of our study for international business, research on public policy and strategy, and the energy transition.

Highlights

International business research has traditionally considered the institutional context as a prominent factor influencing firms’ international strategy (Aguilera & Grøgaard, 2019; Henisz, 2000; North, 1990)
Conceptualizing policy support as a country-specific advantage (CSA) (Clarke, Tamaschke, & Liesch, 2013; Rugman, Verbeke, & Nguyen, 2011), we argue that firms will engage in ‘‘jurisdiction shopping’’, whereby they search for and choose to invest in countries with the most-supportive policy frameworks
We argue that institutional support can be conceptualized as a CSA that is, viewed differently by firms due to their own firm-specific advantages (FSAs) stemming from their firm-specific experience

Summary

INTRODUCTION

International business research has traditionally considered the institutional context as a prominent factor influencing firms’ international strategy (Aguilera & Grøgaard, 2019; Henisz, 2000; North, 1990). Conergy’s nonmarket experience was likely critical in triggering these location choices, as it offers domain-specific knowledge that allows the company to navigate the policy environment (e.g., routines to swiftly secure installation approvals, grid connection licenses, or environmental permits), and the necessary knowhow to assess the potential benefits of the policy Along these lines, prior work has shown that firms in regulated industries enter countries characterized by similar types of firm–regulator interactions because the experience with governments that their home business entails and the specific knowledge they acquire as a result improve their ability to do business in similar foreign countries (CuervoCazurra & Genc, 2008; Garcıa-Canal & Guillen, 2008). Consistent with prior research (e.g., Nachum et al, 2008), we used interactions between different types of firm experience and the host country’s FiT policy generosity to test the moderating hypotheses regarding these firm-level variables

RESULTS

DISCUSSION

Limitations and Future