Natural resource-seeking intent and regulatory forces

Abstract

PurposeThis study aims to investigate how natural resource-seeking as a type of strategic intent influences foreign direct investment (FDI) location choice. Grounded in the strategic intent approach and institution theory, the authors developed an interactive conceptual framework by integrating natural resource-seeking intent (NRI) with regulatory institutional factors.Design/methodology/approachThe authors developed an interactive conceptual framework by integrating NRI at a firm level with regulatory factors of governmental support, political risk and economic freedom at country level. Using empirical data from a sample of 137 Chinese outward foreign direct investment (OFDI) projects in 19 Asian countries, statistical analysis was conducted using a conditional logistic regression technique.FindingsEmpirical findings from our study suggest that NRI has a strong influence on OFDI location choice of the Chinese firms. More importantly, the results demonstrate that influence of NRI on location choice is contingent on the regulatory forces both in the home and host countries settings. NRI is more likely to influence FDI location choice when government support from the home country is stronger and/or when political risk in a host country FDI is higher.Originality/valueThis is an empirical-based original study, and it contributes to the literature in several ways. First, the study enriches the strategic intent approach by demonstrating the contingency conditions from regulatory factors, especially home government support on a firm’s pursuit of NRI. Second, the study provides an explanation for the behaviour pattern of Chinese OFDI regarding their response to political risk in a host country. Third, the study demonstrates the influence of “institutional embededness” on the firm’s strategic intent. Managerial and policy implications are also discussed.