Government policy, filial piety, and foreign direct investment

Abstract

Research SummaryThis study investigates formal institutional pressure from government policy, informal institutional pressure from filial piety, and their interaction effect on firms' internationalization strategy. We argue that, while influenced by independent policy and cultural effects, firms also exercise agency when responding to these competing institutional pressures. We find empirical support for the influence of policy and cultural effects on firms' foreign direct investment (FDI). We also find that, in making decisions about FDIs, state‐owned enterprises are more sensitive to government policy, whereas family businesses are more sensitive to filial piety.Managerial SummaryThis study reveals that firms' strategies in complex institutional environments are influenced by their needs for formal and informal institutional legitimacy. Managers can exercise agency by weighing the importance of formal and informal legitimacy differently and therefore vary in their responses to institutional pressures. However, managerial agency is bound by firm ownership type. Managers of state‐owned firms prioritize formal institutional legitimacy, while their family business counterparts attend more to informal institutional legitimacy. Policymakers should be aware of this important difference between types of firms, which allows them to address noncompliance in a culturally sensitive and ultimately more effective way.

Complexity and multinationals

“…Of course, MNCs develop capabilities to cope with the added challenges and explore strategies that suitably match their resources and distinct advantages. The studies by Steinberg et al (2022), Jonsson and Vahlne (2021), Ma et al (2022), and Vallone et al (2022) examine how MNCs reactively and proactively deal with various aspects of capability and strategy development processes. Well‐thought‐out global strategies help, but their implementation is rarely perfect, trade‐offs are unavoidable, and coordination issues remain ever‐present.…”

“…External process complexity deals with complexities such as the rate of changes in the political and institutional environment that the MNC operates within. For example, Ma et al (2022) explore how firms manage institutional complexity. The authors investigate the interaction between formal institutional pressure from government policy and informal institutional pressure from filial piety on firms' internationalization strategy.…”

Family Diversity and Business Start-Up: Do Family Meals Feed the Fire of Entrepreneurship?

“…Furthermore, for households with greater age diversity, such as those with grandparents or much older parents, the principle of filial piety compels young family members to make risk-averse career choices and to prioritize the needs of elders over their personal career desires so that they can provide stable care and security to them in their old age (Y. J. Chen et al, 2019; Ma et al, 2022). In contrast, the demands of filial piety are less salient when family members are closer in age, thus making it more likely that an individual will be willing to take the risk of starting a business.…”

Inward FDI and local firms' political connections in emerging markets: Evidence from China

“…In addition, China is a fertile ground for studying nonmarket strategies (Chizema et al, 2015; Haveman et al, 2016). Given these advantages, we construct a dataset covering 1463 Chinese listed firms from 2009 to 2017, merging archival data from multiple sources that have been shown to be credible (Ma et al, 2023; Zhou et al, 2017). The results support the hypothesized U‐shaped relationship between inward FDI and local firms' political connections, which becomes more pronounced with a higher level of governmental R&D funding and less so with higher levels of institutional development and firm market diversification.…”