Navigating multiple institutional environments: institutional quality and the role of Belt and Road Initiative on location choice of Chinese MNEs

Abstract

Purpose This study aims to explore the extent to which Chinese multinational enterprises (MNEs) rely on supranational institution – the Belt and Road Initiative (BRI) – versus host country institutional quality to navigate their foreign location choice. Design/methodology/approach This study uses a conditional logit regression model using a sample of 1,302 greenfield investments by Chinese MNEs in 54 BRI participating countries during the period 2011–2018. Findings The results indicate that as a supranational institution, the BRI serves as a substitution mechanism to address the deficiencies in institutional quality in BRI participating countries, thereby attracting Chinese MNEs to invest in those countries. In addition, the BRI’s substitution effect on host country institutional quality is more pronounced for large MNEs, MNEs in the manufacturing industry and MNEs in inland regions. Originality/value This study expands the understanding of the BRI as a supranational institution for MNEs from emerging markets and reveals its substitution effect on the host country institutional quality. Furthermore, it highlights that MNEs with diverse characteristics gain varying degrees of benefits from the BRI.