New Rulers in the City: Local Political Institutional Transition and International Entrepreneurship

Abstract

This study explores how subnational political institutional differences affect where within an economy multinational enterprises decide to locate new ventures. Previous research has shown that cross-national political institutional differences affect a multinational firm’s new venture location strategy. However, we know little about how subnational institutional differences affect multinational enterprise new venture location strategy within the same economy. This is an important question because vastly different formal and informal rules of the game may prevail in different subnational regions within the same economy, affecting not only new venture strategies, but also the effectiveness of those strategies. We develop a theoretical framework proposing that local political institutional transitions create opportunities, but also uncertainties, for new ventures. Whether opportunities outweigh the uncertainties depend on the content, frequency and political-structural consequences of the transition. The the...