Economic Distance and The Survival of Foreign Direct Investments

Tsang, Eric W. K.; Yip, Paul S. L.

doi:10.5465/amj.2007.20159917

Cited by 76 publications

(115 citation statements)

References 42 publications

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“…Furthermore, acquisitions are strongly negatively associated with certain countries of origin, namely the Near East and emerging economies. This may be because MNEs from these countries have fewer financial resources to draw upon, or they lack experience in this mode due to the relatively inactive market for corporate control in their own home countries (Tsang and Yip, 2007).…”

Section: Contributionsmentioning

confidence: 99%

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Institutions, resources, and entry strategies in emerging economies

Meyer

Estrin

Bhaumik

et al. 2008

Strategic Management Journal

1,492

1,203

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We investigate the impact of market-supporting institutions on business strategies by analyzing the entry strategies of foreign investors entering emerging economies. We apply and advance the institution-based view of strategy by integrating it with resource-based considerations. In particular, we show how resource-seeking strategies are pursued using different entry modes in different institutional contexts. Alternative modes of entrygreenfield, acquisition, and joint venture (JV)-allow firms to overcome different kinds of market inefficiencies related to both characteristics of the resources and to the institutional context. In a weaker institutional framework, JVs are used to access many resources, but in a stronger institutional framework, JVs become less important while acquisitions can play a more important role in accessing resources that are intangible and organizationally embedded. Combining survey and archival data from four emerging economies, India, Vietnam, South Africa, and Egypt, we provide empirical support for our hypotheses.

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Section: Contributionsmentioning

confidence: 99%

“…Therefore, studies controlling for country effects may need to consider the Ronen and Shenkar clusters, especially when dealing with emerging economies. Moreover, more research is warranted to explore the nature and causes of the country-of-origin variation that emerges so powerfully in our results (Tsang and Yip, 2007).…”

Section: Contributionsmentioning

confidence: 99%

Institutions, resources, and entry strategies in emerging economies

Meyer

Estrin

Bhaumik

et al. 2008

Strategic Management Journal

1,492

1,203

View full text Add to dashboard Cite

show abstract

“…Despite the continuous legal reforms, the implementation of laws in China remains a primary source of uncertainty for foreign enterprises (Tsang & Yip, 2007), as the law there is mainly an instrument of the state apparatus (Lubman, 1995), and is subject to variations in local interpretation (Boisot & Child, 1999). So far, most authors who discuss the legal system in China focus on how this perception of uncertainty affects the strategy of foreign firms.…”

Section: Macro-level Antecedents Of Perceived Vulnerabilitymentioning

confidence: 99%

Wary managers: Unfavorable environments, perceived vulnerability, and the development of trust in foreign enterprises in China

Tsui‐Auch

Möllering

2009

J Int Bus Stud

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Vulnerability is salient among international managers, who tend to be wary when operating in transition economies like China. Systematic research is lacking, though, on how the local environment influences foreign managers' perception of vulnerability, and how foreign managers can develop trust even when their perceived vulnerability is high. We conducted in-depth case studies of two foreign-controlled enterprises in China, and developed a theoretical model that links perceptions of the macro-level environment to micro-level management. Our results illustrate the antecedents and consequences of perceived vulnerability and the processes of trust building in unfavorable environments. Through comparative analysis of the two cases, we found that the foreign managers' perceived vulnerability was shaped by the institutional, technological, and market conditions of the local environment, and we learned how this perceived vulnerability influenced their trust in the local workforce and the joint investment in formal and social control they used in building trust. The effect of perceived vulnerability on trust was moderated over time when the implementation of control was combined with active investments in trust, which led to behavioral changes on the part of the local employees, which in turn increased their trustworthiness. The implications of these findings are discussed.

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“…8 First, we employed four alternative indicators of institution that affect exports, because it potentially overlooks the complexity and ambiguity in institutional forms to uniquely position countries on a linear scale of trade openness. Following the international business literature that emphasizes the influence of economic development level on institutions (Boehe et al, 2016;Cuervo-Cazurra & Genc, 2008;Tsang & Yip, 2007), we first used the worldwide median level of GDP per capita as the cutoff point to dichotomize all destination economies into more open versus less open economies. Following Shinkle and Kriauciunas (2010), we also measured the export-pertinent institutional profiles of China and destination countries using the average of three sub-indices of the Indices of Economic Freedom, that is, trade freedom, financial freedom, and freedom from corruption.…”

Section: Robustness Testsmentioning

confidence: 99%

“…Second, it challenges the widely accepted norm for analyzing institutional distance and derived constructs. The study incorporates direction of distance (Dau, 2013;Tsang & Yip, 2007;Zaheer, Schomaker, & Nachum, 2012) and conceptualizes upward and downward export expansion speeds. Third, the study assesses if and how rapid upward and downward export expansions generate opposite effects on firm performance and complements the literature that has overly underscored the negative effects of institutional distance and associated concepts (Stahl, Tung, Kostova, & Zellmer-Bruhn, 2016).…”

Section: Introductionmentioning

confidence: 99%

Rapid expansion of international new ventures across institutional distance

2018

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Rapid export expansion into institutionally distant locations has become more possible in the era of digital economy. Will such rapid expansion bring desirable outcome to firms? In a context of international new ventures (INVs) from emerging markets, we reconceptualize export expansion speed as the pace of exporting across institutional distance over a certain period of time. We then examine the relationship between rapid export expansion across institutional distance and overall firm performance. We incorporate directionality into export expansion and hypothesize the relationship to be positive when INVs export upwardly to more open countries, yet the relationship to be negative when INVs export downwardly to less open countries. We also hypothesize that the degree of market liberalization in subnational regions of origin of the INVs moderates the above speed-performance relationships. Instrumental variable models based on data of Chinese indigenous INVs during 2000-2009 support these hypotheses. This study both zooms in and zooms out the analytical lens along the location-related institutional axis, examines the joint effect of institutions involved in supranational directions and subnational origins on firm performance, and advances institutional theory.

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Economic Distance and The Survival of Foreign Direct Investments

Cited by 76 publications

References 42 publications

Institutions, resources, and entry strategies in emerging economies

Institutions, resources, and entry strategies in emerging economies

Wary managers: Unfavorable environments, perceived vulnerability, and the development of trust in foreign enterprises in China

Rapid expansion of international new ventures across institutional distance

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