The dual effects of home country institutions on the internationalization of private firms in emerging markets

Abstract

PurposeThis study aims to examine the dual effects of home country institutional forces (i.e. institutional support and institutional constraints) on the internationalization of private firms in emerging markets. By doing so, this study aims to examine the applicability of the two seemingly paradoxical views (i.e. the governmental promotion view and the institutional escapism view) in explaining private firms’ internationalization. Further, this study investigates how the effect of the home country institutional environment on firms’ internationalization is contingent upon firm characteristics.Design/methodology/approachA sample of Chinese private firms is used to examine the effect of home country institutions on internationalization.FindingsEmpirical findings suggest that both institutional support and institutional constraints promote the internationalization of private firms in emerging markets. Moreover, it is found that firm resources strengthen the effect of government support on internationalization. It is also found that firms’ business ties strengthen the effect of institutional constraint on internationalization, whereas firms’ political ties weaken the effect of institutional constraints on internationalization.Originality/valueBy adopting an integrated and comprehensive investigation of the dual effects of home country institutional environment in emerging markets on internationalization, this study provides evidence to the applicability of the two competing views (i.e. the governmental promotion view and the institutional escapism view) in relation to home country institutional effects on internationalization. In addition, this study examines how institutional effects vary across firms with different resources and social ties, thus extends understandings of the boundary conditions of the two institutional effects.