Home Country Institutional Environment Research Articles

All in the same key? How state policy pressure and local fiscal pressure jointly shape Chinese firms’ OFDI within Belt and Road initiative

ABSTRACT This study aims to examine the effect of state policy pressure on firms’ international expansion and how it is affected by the difference in the public fiscal situation across home-country subregions. Based on longitudinal data from 2013 to 2021 for 4,323 listed firms in China, the results show that: (i) firms that face higher policy pressure from the Belt and Road Initiative (BRI) are more likely to increase their outward foreign direct investment (OFDI) in countries along the BRI route; (ii) this positive relationship is less pronounced for firms headquartered in regions experiencing greater fiscal pressure; (iii) the moderating effect of local fiscal pressure on the relationship between BRI policy pressure and firms’ OFDI to the BRI countries is less pronounced when firms are owned by the central government. These findings shed light on how firms’ strategic responses to the home-country institutional environment are contingent upon both competing institutional pressures and organizational attributes.

Examining the influence of entrepreneurial skills, human capital, and home country institutions on firm internationalization

AbstractIn an increasingly interconnected world, understanding the factors that influence firm internationalization is crucial for businesses and policymakers alike. This study examines the complex interplay between entrepreneurial skills, human capital, institutional environments and firm internationalization. Specifically, it investigates the mediating role of home country institutional environments in the relationship between entrepreneurial skills, human capital and firm internationalization. Based on a theoretical framework that integrates resource‐based and institutional theories, this study employs a quantitative research design, using cross‐sectional international data from the Global Entrepreneurship Development Institute (GEDI) and Global Competitiveness Index 2018 reports for 137 countries. The findings of this reveal compelling insights into the factors driving firm internationalization. Both direct and indirect effects of entrepreneurial skills and human capital on firm internationalization emerge as positive and statistically significant. Moreover, the study underscores the nuanced influence of institutional environments, indicating their partial mediation of the relationship between entrepreneurial skills, human capital and firm internationalization. This sheds light on the pivotal role of the dynamic interplay between resources and institutional frameworks in shaping firms’ strategic decisions to venture into foreign markets. The implications of these results extend beyond academia, with actionable insights for both businesses and policymakers alike. This study not only contributes to our theoretical understanding of internationalization processes but also provides practical guidance for firms seeking to navigate and optimize their global expansion strategies.

The Home Country Institutional Environment as an Internationalization Driver for the Large Brazilian Pharmaceutical Companies

This study analyses the internationalization characteristics of Large Brazilian Pharmaceutical Companies. It contributes to the international business and evolutionary literature by showing how the home country institutional environment affects the firms’ internationalization at a country- and industry-level. The methodology is a multiple case study with eight companies, exploring their competitive advantages, strategies, and obstacles to international expansion. Findings reveal that home country institutional environment constraints pushed companies to build capabilities to survive and compete in the domestic market, which served as advantages when going international. Companies’ internationalization is driven by the exploitation and exploration of assets and capabilities.

Migration and Global Network Formation: Evidence from Female Scientists in Developing Countries

As agents who have the opportunity to develop connections in multiple geographic locations and networks, migrants are uniquely suited to play brokerage roles in science, innovation, and entrepreneurship. But can they succeed in connecting others in their home and host environments? We investigate this question in the context of women in science in the developing world. We hypothesize that the extent to which such scholars facilitate connections will depend upon the extent to which their home and host country institutional environments support them in this brokerage role. Specifically, we propose that the effectiveness of female migrants as brokers is mitigated by national level gender parity, which we expect influences their level of legitimacy and opportunity for brokerage. Our analysis finds that female migrants in science are more likely to share international connections with non-migrants at home if their home countries and host countries have high levels of gender parity. We interpret these findings as providing evidence that institutional support is critical for migrant brokerage and the globalization of knowledge production. History: This paper has been accepted for the Organization Science Special Issue on Migration & Organizations. Funding: This work was supported by the National Bureau of Economics Research Science of Science Funding program (Science of Science Funding program) J. L. Furman gratefully acknowledges financial support from NSF SciSIP grant, SES-1564368. Supplemental Material: The e-companion is available at https://doi.org/10.1287/orsc.2023.1683 .

Impacts of home country's institutional environment on OFDI dual margin

This study uses SDM model, SLM model and SEM model to investigate the impacts of the institutional environment of the home country on OFDI dual margin. The study reveals that there is a spatial spillover effect of the institutional environment on the dual margin. Then, The institutional environment is divided into economic environment, political environment and legal environment. The degree of financial support, legalization and corruption all have significant influence on the dual margin, but the impacts on the margin of expansion and the margin of intensification are discrepant. Furthermore, in order to analyze the regional heterogeneity of the impact of institutional environment factors on dual margin, China is divided into three regions, namely east, middle and west for sub-sample study. The study found that the impact of institutional environment does exist regional differences and spatial spillovers. Our results remain unchanged after robustness checks.

Institutional Capabilities and Time to First Internationalization: A Study of Indian Firms

Institutions have been shown to be an important determinant for a firm’s internationalisation strategy, yet the literature dealing with the role of institutional change is scarce. Both, host and home country institutional environment, as well as their evolvement, shape a firm’s internationalisation strategy, including their speed of first internationalization. To fully comprehend in how far such institutional change affect domestic firms’ speed of internationalization, the focus of this paper lies on home country capability development that enables a quick internationalization after inception. We argue that firms develop institutional capabilities from home country institutional change and incorporate aspects of experiential and organizational learning to understand capability development. We link this home country capability development to the firm’s ability to pursue a faster first internationalization.

The interplay between home and host institutions on CBA ownership decision

AbstractCross‐border acquisitions (CBAs) are one of the key strategies for internationalization. However, most of what is known about CBA strategies relies on the effects of the host country's environment or the home country's conditions. In this article, we analyze the interplay between these two important factors. We show that companies from less institutionally developed countries are more influenced by poor institutional conditions found in host countries. We analyzed a dataset of 1,390 cross‐border acquisitions performed by Latin American firms. The literature on the subject points out that less developed host environments lead to fewer shares of ownership acquired in CBAs. However, we confirmed that the quality of the home country's institutional environment positively moderates the effects of the host environment over ownership choice in the acquisition. This effect is due to companies from less developed environments being able to use their embedded capabilities to better navigate faulty institutional environments abroad.

Belt and Road Initiative and OFDI from China: the paradox of home country institutional environment between state and local governments

PurposeThis study aims to explore the effect of the home country institutional environment on firms’ outward foreign direct investment (OFDI) and how it is affected by institutional environment differences across home country subregions. Drawing on transaction cost theory, this paper examined the relationship between the Belt and Road Initiative (BRI) and Chinese firms’ OFDI, as well as the moderating roles of local government officials’ career horizons and state ownership.Design/methodology/approachA sample of 5,018 Chinese firm-year observations with foreign investment activities was used over 11 years to estimate a panel-feasible generalized least square regression model.FindingsThe results show that the BRI improves Chinese firms’ OFDI in countries along the BRI route. Furthermore, this positive relationship is weaker for firms where provincial officials have longer career horizons and is stronger for state-owned enterprises (SOEs) compared to non-SOEs.Originality/valueThe findings confirm the positive effect of home country institutional environment on firms’ OFDI. Furthermore, the multiple government perspective offers new insight into the effects of the home country’s institutional environment on OFDI.

Emerging market firm investments in advanced markets: A country of origin perspective

Drawing on the model of competitive advantages of nations and the concept of emerging market development heterogeneity, we argue the unique home country institutional and resource environments of emerging market firms influence the propensity of those firms to invest in advanced markets via mergers and acquisitions. Using data of 9157 cross-border M&A transactions originating from 60 emerging markets between 2006 and 2018, we find that the level of home country institutional development, capital market development, and the technological readiness of EMFs are positively associated with the propensity to invest and the scale of investment in advanced markets. However, the level of home country factor market development is negatively associated with the likelihood of EMF investment and the scale of investment in advanced markets.

Drivers of Indigenous Ghanaian Firms' Degree of internationalization

The study aims to investigate home country institutional environment factors influencing indigenous firms' internationalization in Ghana. Precisely, the study examines the relationship between pull factors, push factors and internationalization. The paper leads to a comprehensive understanding of factors driving firms’ internationalization, which could facilitate government support for such indigenous firms. The first research objective is to explore how favourable domestic factors pull/induce internationalization in line with the institutional-based view. The second proposed research objective aimed to examine the relationship between unfavourable factors and the internationalization of indigenous Ghanaian firms. The study is based on an institutional-based view and employed an online survey questionnaire to sample 109 key informants actively involved in the export and management of the export business. The data obtained were analyzed using multiple regression. The data were analyzed using STATA version 13 software. Also, Pearson correlation, linear regression and multiple regress were used to determine the association. The findings from the study indicate a negative relationship between pull factors and internationalization, with push factors recording no significant effect on the internationalization of firms. Keywords : Favorable factors, Pull factors, Unfavourable factors, Push factors, Indigenous firm, Institutions, Internationalization DOI: 10.7176/EJBM/14-3-05 Publication date: February 28 th 2022

The standalone and resource-bundling effects of government and nongovernment institutional support on early internationalizing firms’ performance

PurposeThis study aims to analyze the individual and joint effects of institutional support by government and nongovernment institutions on early internationalizing firms’ (EIFs) performance. It also investigated the moderating impact of firm age and size on the institutional support-firms’ export performance relationships.Design/methodology/approachData were collected from 705 EIFs in the apparel industry of Bangladesh and analyzed with hierarchical regression.FindingsThe positive influence of institutional support on exporting firms’ financial performance is stronger for the joint effect of government and nongovernment assistance than the individual impact. Firms’ size positively moderates the impact of individual government and nongovernment assistance, while age positively moderates their resource-bundling effect.Research limitations/implicationsThe findings suggest the necessity of integrating resources from diverse but complementary sources of institutional support for superior export performance. The findings also show the presence of the liability of smallness and liability of newness in the standalone and joint influence of institutional support, respectively.Practical implicationsFirms need to bundle resources obtained from the government (unrequited) and nongovernment (reciprocal) institutional support to overcome the liability of smallness they might encounter while availing of support from only one source.Originality/valueDistinguishing between government and nongovernment institutional support, this paper sheds light on exporting firms’ resource-bundling mechanism for these two sources of support in the backdrop of an emerging economy. It also offers fresh insights into the critical role of the liabilities of newness and smallness in early internationalization, especially with regard to the home-country institutional environment.

The micro-foundations of the returnee liability: The interpersonal challenges of returnee entrepreneurs in Kenya

Although it is known that returnee entrepreneurs can contribute to technological and economic upgrading in their home countries, there is also evidence of a returnee liability where returnee entrepreneurs perform worse than locals. Apart from mismatches between home and host country institutional environments, this liability is argued to stem from interpersonal factors like cultural difficulties and the diminished social capital of returnees at home. Using interviews exploring the experiences of twenty Nairobi-based technology-enabled returnee entrepreneurs, we theorize the micro-foundations of the returnee liability: mismatched expectations, cultural tension and mutual suspicion. Returnees who sent remittances while abroad expect locals to support their return and entrepreneurial vision, but locals expect continued financial support. Returnees who had become more individualistic while fending for themselves in Western economies experience tension with the collectivism of locals, even while they seek to readjust to their home culture. The suspicion of returnees about unethical local business practices and frustration about locals’' apparent inability to value proposed innovations further complicate the ability of returnees to access local knowledge and networks. We discuss how the community support addresses these micro-foundations of the returnee liability and thus help developing countries better benefit from the knowledge and innovations of their returnees.

Export Regulations, Credit Markets, and Corruption: Implications for Internationalization

We study how key dimensions in the home country institutional environment – credit markets environment, export regulation, and corruption – affect firm internationalization via exporting and outward foreign direct investment (OFDI). We conduct our study using country- level data from 96 developed and developing countries between 2000 and 2018. Our results provide novel insights on the channel of internationalization as a response to changes in home country export regulations, credit market development, corruption. Changes in home- country institutions effect mainly type of firm internationalization, with the differences in the relationship between institutions and OFDI mainly associated with credit market conditions.

How Does Government Ownership Affect a Chinese Firm’s Long-Term Performance After a CBA?

Recent research on cross-border acquisitions (CBAs) has relied heavily on the firm-level resource-based perspective without adequately addressing the role of the institutional context. The rising CBAs by Chinese firms have posed a significant challenge to extant literature due to their relatively unique characteristics and their distinct home country institutional environment, in particular the active role of the government. In this study, we seek to integrate the institution-based view with the resource-based perspective and examine how Chinese firms’ post-CBA long-term performance is affected by government ownership in conjunction with key firm-specific and institutional boundary conditions. Our study shows that Chinese firms with more government ownership demonstrate better post-CBA long-term performance. However, the above relationship is moderated by such firm-level boundary conditions as political connection and financial slack, and the country-level institutional boundary conditions (i.e. the host country formal institutions and the home-host country cultural distance).

Home country institutional drivers and performance outcomes of export market orientation: the moderating role of firm resources

PurposeAnchored mainly on the institutional theory and resource-based view, this study endeavors to investigate the interplay between home country institutional environment (economic, regulatory and socio-cultural environment), export market orientation and export performance. Besides, this study also aims to examine the moderating role of firm resources (knowledge-based and managerial resources) in the associations between home country institutions and export market orientation.Design/methodology/approachDrawing on data from a sample of 221 exporting firms in Turkey, the conceptual model is empirically examined by structural equation modeling.FindingsThe findings reveal that regulatory environment is conducive to the improvement of export market orientation, which is instrumental in cultivating export performance. Importantly, empirical evidence also proves that higher levels of knowledge-based and managerial resources strengthen the linkage between home country institutions and export market orientation.Originality/valueIntegrating institutional theory with the resource-based view, this research considerably contributes to the current understanding of the export market orientation phenomenon by filling the knowledge gap on the differential impacts of home country’s economic, regulatory and socio-cultural environment on export market orientation. Moreover, this study provides worthwhile insights into the moderating effect of knowledge-based and managerial resources on home country institutions and export market orientation and the interrelationship between export market orientation and export performance in an emerging economy.

Home country institutions and export behaviour of SMEs from transition economies: the case of Russia

This study examines the relationship between home country institutional environment and export behaviour of small and medium-sized enterprises (SMEs) from transition economies. It is argued that perceived institutional challenges in home country may explain significant differences in exporting among firms. By focusing on Russia, as a context of transition economy, it is empirically tested how the perceived tax and financial barriers define export propensity of SMEs, and whether corruption concerns can play a role of a moderator and navigate firms' export activities. Data on 3136 Russian SMEs provide strong support for the effects of the perceived institutional dimensions on firms' propensity to export. The results offer a more fine-grained picture of institutional environment by contributing to the extant literature and show that the impact of home country institutions is dependent on the subjective perception which plays an important role in shaping export behaviour of Russian SMEs. The implications are discussed.

Home country institutions, social value orientation, and the internationalization of ventures

We examined how home country formal institutions and the venture’s value orientation influenced the venture’s likelihood of internationalization based on a data set that was adapted from the Global Entrepreneurship Monitor (GEM) data in the year 2009, covering 7668 individual ventures in 25 countries. Better-developed home country formal institutions are found to have a supportive impact on the venture’s likelihood of internationalization. The supportive impact is also found to be weaker for socially oriented ventures than for profit-oriented ventures. The venture’s social value orientation negatively moderates the home country formal institutions–likelihood of internationalization relationship. The negative moderating effects can be explained as follows: Socially oriented ventures in the better-developed home country institutional environment are less likely to develop coping skills against uncertain and risky institutional environments, which are common in their host countries. Besides the theoretical contributions, this paper also highlights the implications for both business researchers and policy makers.

Liability of Foreignness in Global Stock Markets: Liquidity Dynamics of Foreign IPOs in the US

Using a unique dataset of foreign and domestic IPOs listings in the US from 1990 to 2012, we study how foreignness affects IPO liquidity. We find that foreign IPOs enjoy higher liquidity than IPOs in their home countries, but do not fully gain the same liquidity benefits as for IPOs of domestic US issuers. In contrast to prior evidence for mature cross-listed firms, we show that liquidity differentials between foreign and domestic IPOs in the US are determined by information asymmetry related to foreignness rather than to home-country institutional environment characteristics. Thus, our results extend prior findings to reveal salient differences in liquidity and liquidity determinants between IPOs offerings by foreign and domestic firms in the US.

Who Invests in Tax Havens? Liability of Privateness and International Tax Avoidance

In this study, we draw upon resource dependence theory to investigate how international tax avoidance behavior of emerging market firms is driven by their home country institutional environments. T...

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

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.