Role of “Indianness” in International Location choice – The effect of religion and langauge

Abstract

Unlike other countries’ firms that have undergone the path of liberalization since the 1990s, Indian Multinational Enterprises (MNEs) have registered exceptional cross-border activities. Originating from the institutional void, a large majority of successful Indian MNEs are generally part of a single business family’s portfolio of businesses, commonly known as business groups (BGs). MNEs are embedded in their home country environment before their internationalization. Thus, acknowledging the role of home country institutions in shaping the culture of the organization, we adopt the concept of “Indianness” and unpack it in the form of linguistic and religious diversity which shapes the organizations in their formative years. This study aims to understand the impact of Indianness on the foreign location choice of the most deeply entrenched organizational forms, that is, the Indian BGs. Here we show that Indian firms prefer to internationalize to nations that are least distant linguistically and religiously and have a less diverse set of languages and more diverse religiously. Additionally, as the religious distance seems to dissuade the location choice in high distant nations, international experience gained by the same BGs’ affiliate in the same or psychically similar host nations aids in choosing religiously distant nations. These results are contrary to the belief that high religious or linguistic distance dampens the prospects of foreign location choice. This study also highlights the role of prior experience in the same or psychically similar nations in aiding the reduction of the negative impacts of religious differences. This study brings to fore the importance of home country (informal)institutions or as we term them Indianness in the case of Indian MNEs internationalization.