Emerging Economy MNEs: How does home country munificence matter?

Abstract

Multinational Enterprises (MNEs) from emerging economies (EEs) are establishing operations in advanced economies (AEs), apparently departing from traditional models of internationalization. We explore an underexplored difference between EE MNE and their AE counterparts concerning their country of origin: EEs have less munificent business environments. This leads EE MNEs to make different location choices than AE MNEs when entering AEs, specifically because they are more deterred by barriers to entry. We therefore predict EE MNEs to be relatively more deterred by distance and weak intellectual property protection and relatively more attracted by diaspora of migrants and by markets. Our empirical results are consistent with these predictions.