Institutional Distance, Organizational Learning, and Innovation Performance: Outward Foreign Direct Investment by Chinese Multinational Enterprises

Yang, Changjun; Xu, Xueyu; Chen, Chusheng; Wu, Yenchun Jim

doi:10.1080/1540496x.2018.1545118

Cited by 17 publications

(22 citation statements)

References 67 publications

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“…Institutional distance between the subsidiary home and host contexts can be formal or informal (Hitt, 2016), with the former involving differences on explicit rules and standards (Hitt, 2016), and the latter on aspects such as culture, administration, geography, and economy (Benito and Gripsrud, 1992; Ghemawat, 2007; Berry et al ., 2010; Antunes et al ., 2019). While both aspects impact subsidiaries differently (Aguilera‐Caracuel et al ., 2013), and at times in opposite directions (Yi et al ., 2020), research on institutional distance mainly looks at formal institutional distance and informal institutional distance, either alone, together in isolation, or as a combined construct (Wu, 2013; Yeh and Hsiao, 2020). This leads to low generalizability (Tihanyi et al ., 2005) and inconsistency of findings (Xu et al ., 2021).…”

Section: Introductionmentioning

confidence: 99%

Institutional Distance and MNE‐subsidiary Initiative Collaboration: The Role of Dual Embeddedness

Raziq

Benito

Ahmad

2021

European Management Review

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Entrepreneurial initiatives by subsidiaries are greeted as well as contested. We examine the effect of institutional distance between the host country of a subsidiary and the home country of its parent multinational enterprise (MNE) on the resource support a subsidiary receives from the MNE for its entrepreneurial initiatives. Drawing on social exchange theory, and resource dependence theory, we argue that while informal institutional distance inhibits MNE resource support for initiatives, and formal institutional distance further exacerbates the subsidiaries' options, external embeddedness and reverse knowledge transfers may help subsidiaries bypass the negative effects of institutional distance and encourage MNE involvement in subsidiary initiatives. Using survey data from 429 foreign subsidiaries in New Zealand, and secondary data on formal institutional distance from the Worldwide Governance Indicators, the results from structural equation modeling provide support to our hypotheses. This study extends institutional distance, embeddedness, and subsidiary initiative research. Importantly, it contributes by demonstrating how contingencies such as dual embeddedness and (low) formal institutional distance can counterbalance the negative effects of informal institutional distance on subsidiary initiatives and MNE‐subsidiary initiative collaboration.

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Section: Introductionmentioning

confidence: 99%

Institutional Distance and MNE‐subsidiary Initiative Collaboration: The Role of Dual Embeddedness

Raziq

Benito

Ahmad

2021

European Management Review

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“…Scholars have studied various types of distance, including the aspects of cultural distance (CD), e.g. (Beugelsdijk et al, 2018;Deng et al, 2019;Kirkman et al, 2017;Lucke and Eichler, 2016) and institutional distance (ID), for instance (Aguilera and Grøgaard, 2019;Choi et al, 2016;Jackson and Deeg, 2019;Yi et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

The influence of cultural and institutional distance on China's OFDI efficiency: fresh evidence from stochastic frontier gravity model

Zheng

Wang

Kamal

et al. 2020

IJOEM

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PurposeCulture and institutions are among the essential sources of comparative advantage in international trade and may influence a country's FDI influx. This paper aims to analyze the impact of cultural distance (CD) and institutional distance (ID) on the efficiency of China's outward foreign direct investment (OFDI) for the panel of 43 countries during 2003–2016.Design/methodology/approachThe stochastic frontier approach (SFA) has been incorporated into the standard gravity model of gravity Kalirajan, 1999; Ravishankar and Stack, 2014). SFA has traditionally been implemented to evaluate the production frontier as the highest yield that could possibly be generated from specified input levels. The production process is viewed to be fully efficient if the real output is performed at frontier level. Otherwise, the production process is assumed technically inefficient, which implies potential scope for enhanced output. This error term is split into two parts, a non-negative term and more standard asymmetrical term. The former identifies inefficiencies in production, while the latter retrieves random disordersFindingsThe outcomes assert a U-shaped relationship between CD and the efficiency of China's OFDI. Put differently, when the CD is minimal, the “liability of foreignness” (LOF) effect plays a dominant role; and CD tends to reduce the efficiency of China's OFDI. On the flip side, when the culture distance is greater than a certain threshold level, the “advantages of foreignness” (AOF) effect plays a predominant role, and CD improves the efficiency of China's OFDI. Institutional distance results in the “LOF” effect significantly reduce the efficiency of China's OFDI.Research limitations/implicationsNotwithstanding these contributions, our study has some limitations which offer directions for future research. The major limitation of this research work is the availability of comprehensive data for a well extended time, in particular for the variable of CD. Further, a firm-level study can shed light on the motivations and performance of China OFDI. Finally, given that our analysis focuses on emerging market multinational enterprises (EMNEs) from China, the findings might not be explicitly generalizable to MNEs from other developing countries. Future studies should concentrate on the comparative study of China's OFDI with other developing countries, to deepen our understanding of the effects of ID and CD on the efficiency of OFDI.Originality/value(1) The work is novel in nature as the authors attempt to explore the effect of ID and CD on efficiency of Chinese FDI. To the best of the authors’ knowledge, no research is conducted in this direction in terms of Chinese FDI. (2) Further, the prior studies employed standard gravity model, which may not correctly evaluate the trade potential viewed as the highest potential value. To overcome the shortcomings of the standard gravity model in estimation of the trade performance and efficiency, the SFA has been incorporated into the standard gravity model of gravity.

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“…The positive effects that enterprises are accessible to external advanced technology and thus improve their private technological innovation capability through OFDI have been empirically con rmed (García et al, 2013;Oscar and Carmen, 2015;Piperopoulos et al, 2018;Javorcik et al, 2018). The realization of this positive effect involves reverse technology spillover effect (Du et al, 2012;Hamida,2017), feedback effect of investment income (Li et al, 2016b;Piperopoulos et al, 2018); Learning effect (Bena and Li, 2014;Ye et al, 2018;Yi et al, 2020), and other contexts.…”

Section: Introductionmentioning

confidence: 94%

How does Outward Foreign Direct Investment Affect Enterprise Green Technology Innovation? — Based on the Moderating effect of Resources

2021

Preprint

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with the increasing strict environmental regulations in the green transition process, outward foreign direct investment is considered to be an effective approach to promote enterprises’ green technology innovation. Thus, this paper establishes a comprehensive research framework that integrates OFDI and green technology innovation from the micro level of the enterprise to analyze it. The findings show that: First, OFDI will positively affect corporate green-tech innovation as expected; Government subsidies have a U-shaped regulation on the relation between OFDI and green-tech innovation; Absorbed slack plays an inverted U-shaped moderating effect on the relation between OFDI and green-tech innovation, and the unabsorbed slack positively affect this process. As for the heterogeneity of property rights, the test results of non-state-owned enterprises and state-owned enterprises are basically consistent with the baseline results, except for the following two points: the unabsorbed slack of state-owned enterprises has no regulatory effect between OFDI and enterprise green technology innovation, and the absorbed slack of non-state-owned enterprises has no regulatory effect between OFDI and enterprise green technology innovation.

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Institutional Distance, Organizational Learning, and Innovation Performance: Outward Foreign Direct Investment by Chinese Multinational Enterprises

Cited by 17 publications

References 67 publications

Institutional Distance and MNE‐subsidiary Initiative Collaboration: The Role of Dual Embeddedness

Institutional Distance and MNE‐subsidiary Initiative Collaboration: The Role of Dual Embeddedness

The influence of cultural and institutional distance on China's OFDI efficiency: fresh evidence from stochastic frontier gravity model

How does Outward Foreign Direct Investment Affect Enterprise Green Technology Innovation? — Based on the Moderating effect of Resources

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