Institutions, firm resources and the foreign establishment mode choices of Chinese firms: The moderating role of home regional institutional development

Abstract

Although the foreign establishment mode choices of emerging market enterprises (i.e. the choice between mergers and acquisitions and greenfield investment) are attracting increasing research attention within international business, there is limited understanding of the firm-specific resources and institutional conditions under which intra-national institutional differences might affect foreign establishment mode choices. This paper helps to bridge this gap by investigating how home regional institutional developments influence firms' foreign establishment mode choices, the moderating impact of firms' international experiences, and the institutional qualities of host countries on this relationship. Using primary data from a large survey conducted in China and secondary data from public sources, our results show that a firm's international experience and the institutional quality of the host country moderates the effects of home regional institutional development on establishment mode choices by mitigating the liabilities of foreignness and the reliance on home institutions inherent to emerging market enterprises.