Ownership Groups and International Investments: Direct and Interactive Effects

Abstract

We examine the direct and moderated influence of different ownership groups on international investments in emerging economy firms. We argue that the identity of owners influence internationalization decision of firms, often in different directions. Our results, based on a panel of 30385 firm years, demonstrate that higher shareholdings by promoters result in lower levels of internationalization by emerging economy firms. Furthermore, institutional investors are also significant in determining international investments of a firm, but different heterogeneous groups of institutional investors have different preferences for this strategy. We also find evidence that ownership groups moderate each other’s preference for international diversification. Pressure resistant institutions prefer promoter-owned firms, while pressure-sensitive institutions are wary of high promoter ownership when high risk strategies such as internationalization is being considered by the firm.