The role of perceived institutional distance in foreign ownership level decisions of new MNEs

Trąpczyński, Piotr; Halaszovich, Tilo; Piaskowska, Dorota

doi:10.1016/j.jbusres.2019.02.018

Cited by 19 publications

(15 citation statements)

References 118 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…2016; Trąpczyński et al. 2019). Similarly, researchers have investigated the moderating impact of political factors and found that emerging‐market firms with home government ownership and legislative connections in the host country have higher risk tolerance and prefer a higher level of ownership in an unfamiliar host institution (Pan et al.…”

Section: Determinants Of Equity Ownership Decisions: Theoretical Frammentioning

confidence: 99%

Determinants of Equity Ownership Stake in Foreign Entry Decisions: A Systematic Review and Research Agenda

Chhabra

Popli

2021

Int J Management Reviews

View full text Add to dashboard Cite

In international business (IB), the level of equity ownership adopted by a firm is an important decision. In this study, we review and synthesize the findings of 105 empirical studies published in prominent IB and management journals on the determinants of equity ownership stake in foreign investment decisions, published between 1991 and 2020. Three primary theoretical lenses ‒ organizational learning perspective, transaction cost economics and institutional perspective – are adopted to catalogue and synthesize the existing literature. We find that, despite the proliferation of IB studies on antecedents of level of equity ownership decisions, many unanswered questions remain. We also find that theoretical fault lines impede progress in this research stream. Based on the literature review, we suggest a research programme that includes accounting for the behavioural view of decision‐making in the organization, shifting from an atomistic perspective to a network perspective of the firm, having a better understanding of the process of internationalization and considering industry heterogeneity as well as the host country's characteristics.

show abstract

Section: Determinants Of Equity Ownership Decisions: Theoretical Frammentioning

confidence: 99%

Determinants of Equity Ownership Stake in Foreign Entry Decisions: A Systematic Review and Research Agenda

Chhabra

Popli

2021

Int J Management Reviews

View full text Add to dashboard Cite

show abstract

“…Despite the prevailing view that institutional distance consistently increases the complexity of managing an MNE and the difficulty of gaining legitimacy in a foreign market (Kostova and Zaheer, 1999;Xu and Shenkar, 2002), scholars are increasingly recognizing potential positive effects as well as asymmetry of institutional distance. A stream of research based on these assumptions has examined the effects of institutional distance on foreign direct investment (FDI) flows (Aleksynska and Havrylchyk, 2013), international location choices (Hern andez et al, 2018), foreign entry mode (Hern andez and Nieto, 2015;Konara and Shirodkar, 2017;Mueller et al, 2017;Trąpczy nski et al, 2020) and foreign affiliate's performance (Konara and Shirodkar, 2018;Trąpczy nski and Banalieva, 2016). The extent of resource commitment has far-reaching impact for firms expanding into a foreign market (Dikova and Brouthers, 2016); therefore, the focus of this study is on the ownership implications of institutional distance in international acquisitions.…”

Section: Theoretical Background and Hypotheses Development 21 Institutional Distance And Ownershipmentioning

confidence: 99%

“…Further, entry mode and ownership have not only drawn the most attention in the new approach to distance, but also generated much inconsistency and debate on the actual effect of institutions that we seek to resolve. More specifically, both "positive" and "negative" institutional distances have been found to have varying outcomes across studies, ranging from positive to non-significant, to negative impacts on ownership levels in foreign subsidiaries in different contexts (Hern andez and Nieto, 2015;Konara and Shirodkar, 2017;Mueller et al, 2017;Trąpczy nski et al, 2020). Focusing on either a single home country (Trąpczy nski et al, 2020), or MNEs from either emerging or developed economies (Konara and Shirodkar, 2017), can account for these inconsistencies.…”

Section: Theoretical Background and Hypotheses Development 21 Institutional Distance And Ownershipmentioning

confidence: 99%

“…This is because in such environments, compared to the home country, laws and regulations are less stable, clear and enforceable, which creates problems in technology transfers and protecting transactions and property rights, thereby deterring investments (Hern andez et al, 2018;Rammal and Zurbruegg, 2006). Moreover, reliable information is less readily available increasing the learning costs of gaining knowledge on the local market and makes it difficult to deal with its information asymmetries Shirodkar, 2017, 2018;Trąpczy nski et al, 2020). Ultimately, the resulting uncertainty poses adaptation challenges for the MNEs and reduces their ability to conform to local requirements to achieve legitimacy (Chan and Makino, 2007).…”

Section: Direction Of Institutional Distancementioning

confidence: 99%

See 1 more Smart Citation

Strong alien or weak acquaintance? The effect of perceived institutional distance and cross-national uncertainty on ownership level in foreign acquisitions

Askarzadeh

Yousefi

Bajestani

2020

RIBS

View full text Add to dashboard Cite

Purpose Focusing on the direction of foreign acquisition, this study aims to differentiate the effect of institutional distance on the level of ownership. The authors identify several theoretical and methodological issues that might account for the inconsistencies in the literature and provide remedies accordingly. Specifically, the authors propose perceived institutional distance as a conceptualization of distance that controls for asymmetric uncertainty. Design/methodology/approach The authors test the framework with ordinary least squares regression for a sample of 14,192 firm-entries in 115 target countries over 2007–2017. Findings The authors find that institutional distance shows a negative effect on equity ownership in all-inclusive global samples, while there are two imbalanced opposite effects if direction is considered. This casts doubt on the validity of studies that ignore direction. The authors suggest that multinational enterprises entering countries with lower-quality institutions tend to perceive more pronounced distance effects than those expanding the other way around. Hence, the authors argue that “perceived institutional distance” better explains the functional role of distance than simple distance. Practical implications This study better delineates the link between distance and uncertainty and enhances managerial insights for entry mode selection. For policy-making purposes, the authors also show that improvement in institutional quality has a different effect on foreign resource commitment in developed and developing countries. Originality/value To the best of authors’ knowledge, this is the first study that considers both directionality and imbalance in institutional distance and proposes a measure to control for non-linear asymmetric relationship between distance and ownership. The authors extend the institutional theory and show the superiority of perceived institutional distance in predicting ownership implications.

show abstract

“…However, some scholars have suggested that the trend of "dominant trade" of developed countries has gradually transferred to developing countries in the fields of import and export [18]. ID between countries has become an important factor affecting bilateral trade costs against the background of globalization [19]. On the one hand, according to traditional Institutional Economics Theory, scholars generally believe that an increase in ID will significantly raise the cost of bilateral trade and accelerate trade friction [20], having a negative impact on the trade [21][22][23].…”

Section: Introductionmentioning

confidence: 99%

Impact of Multi-Dimensional and Dynamic Distance on China’s Exports of Wooden Forest Products to Countries along the “Belt and Road”

Bin

Cao

et al. 2020

Sustainability

View full text Add to dashboard Cite

National distance (ND) is the key factor that affects international trade but the traditional trade gravity model only considers spatial distance, which is not enough. This paper therefore constructs a trade gravity model and a Generalized Moment Estimation Model (GMM) based on four dimensions—spatial distance (SD), economic distance (ED), institutional distance (ID) and cultural distance (CD)—comprehensively analyzing the impact of the heterogeneity represented by national distance on exports of wooden forest products (EWFP) from China to countries along the “Belt and Road” using panel data from 2001 to2018. The results show that the impacts of the four types of ND on China’s EWFP are different and that a major change has taken place since the “Belt and Road” initiative was proposed, within which CD has become the key factor that hinders exports, while the traditional SD is not significant. Therefore, using NDs instead of the SD of the traditional trade gravity model is much more reasonable. Finally, this paper proposes some suggestions to reduce the ND between China and the route countries and to promote cooperation among them.

show abstract

The role of perceived institutional distance in foreign ownership level decisions of new MNEs

Cited by 19 publications

References 118 publications

Determinants of Equity Ownership Stake in Foreign Entry Decisions: A Systematic Review and Research Agenda

Determinants of Equity Ownership Stake in Foreign Entry Decisions: A Systematic Review and Research Agenda

Strong alien or weak acquaintance? The effect of perceived institutional distance and cross-national uncertainty on ownership level in foreign acquisitions

Impact of Multi-Dimensional and Dynamic Distance on China’s Exports of Wooden Forest Products to Countries along the “Belt and Road”

Contact Info

Product

Resources

About