Escaping from institutional weakness by EM-MNEs: the role of firms’ resources vulnerability

Abstract

Purpose How does emerging market multinational enterprises’ (EM MNEs) resource vulnerability to domestic institutional weakness influence the escapist outward foreign direct investment (OFDI)? This study aims to focus on how varying qualities of technological resources make EM MNEs vulnerable to institutional weakness at home and when such a vulnerability triggers escapist OFDI. Design/methodology/approach A mix of primary and secondary data is used to study evidence of escapist OFDI in the case of multilatinas. Structural equation modelling and hierarchical regressions were applied to test the hypotheses. Findings Domestic institutional weakness triggers escapist OFDI only when EM MNEs’ resources are vulnerable to institutional pressures. Technological leadership increases the vulnerability of EM MNEs to the pressure of institutional weaknesses at home, which, in turn, motivates escapist OFDI. Originality/value In discussing the role of firm resources and their vulnerability to institutional weakness, a mechanism is proposed to shed light on how EM MNEs transform the general country framework of the institutional environment into the specific decision to escape via OFDI.

Effect of populism on the internationalization of emerging market firms

“…The reason is that its anti-establishment ideology changes and challenges the status quo, which sets the context for a new reality that deserves more attention from the IB literature to comprehend its implications on firm strategies (Ghauri et al , 2021). This notion focuses on the effect of the institutional context of emerging markets on the internationalization decision of local firms (Losada-Otálora and Andonova, 2022), because such markets may provide a fertile ground for the interventionism of the state in the economy. This aspect is also related to the increase of protectionist policies pervasive to integration among countries and, consequently, increased global uncertainty and costs for cross-border transactions (Ciravegna and Michailova, 2022).…”