More Money or More People? Institutional Distance, Slack Resources, and EMNE Internationalization

Abstract

Multinational enterprises draw on their resources and experience to overcome institutional distance. While emerging market multinational enterprises (EMNEs) are relative latecomers to global competition and oftentimes lack superior technologies or brands, they may have other resources at their disposal, notably skilled and relatively low-cost labor, and deep pockets. Combining institutional theory and arguments around liability of foreignness with a Penrosian perspective of resources, we test for the moderating effect of two types of firm resources, financial and human resource slack, on the link between institutional distance and foreign market entry in a sample of 171 Indian computer software multinationals over 16 years. Findings suggest that financial slack is more important for EMNEs entering an institutionally developed market, but there is only limited support for the contention that slack in the form of human resources is more important when the EMNEs is entering an institutionally less-developed market.