How do emerging multinationals configure political connections across institutional contexts?

Abstract

Research Summary Forming informal ties with political agents is viewed as a viable strategy for multinational enterprises seeking to enter emerging countries. Less is known about the conditions under which political connection is most helpful for firms dealing with cross‐border institutional distance. We discuss the distinctive mechanisms through which emerging multinationals may benefit from both home and host political connections. Based on the strategy tripod perspective, we postulate that the importance of different types of connections depends on the overall configurations of a firm’s resources and industry characteristics, and these may change with institutional distance. Our analysis of a sample of Chinese high‐tech manufacturing firms yields new insights into political connections, institutional distance, and the strategy tripod perspective. Managerial Summary Political connections play an important role in firms’ international expansion. In this study, we consider the importance of home political connections and host political connections in overcoming institutional barriers to foreign entry. We show that this importance varies, depending on firms’ resource bases and industry dynamics, and it may switch from a useful asset to a dispensable one under certain circumstances. We reach our conclusion from an analysis of Chinese high‐tech manufacturing firms’ foreign direct investment.

Regional competitiveness for attracting and retaining foreign direct investment: a configurational analysis of Chinese provinces

“…These overall coverage levels indicate the empirical importance of the solution as a whole (Ragin, 2008). When measuring how well a solution corresponds with data, previous studies suggest an acceptable consistency of 0.80 (Chen et al, 2018;Cui et al, 2017;Fiss, 2011). In this study, our individual and overall solutions measured well above the required consistency levels (that is, 0.91 for MNE entry solutions and 0.88 for MNE exit solutions).…”

Business group affiliation and foreign subsidiary performance

“…Finally, BGs have in emerging economies considerable political and social influence on the forming of governmental policy and regulation (Chen, Li, & Fan, 2018;Cuervo-Cazurra et al, 2019;Hu et al, 2019;Rajwani & Liedong, 2015). Thus, foreign subsidiaries located in institutionally weak markets benefit more from BG affiliation advantages when compared to foreign subsidiaries located in institutionally developed markets.…”

Corporate political connections in global strategy

“…Chen, Li, and Fan () investigate how and under which conditions CPC become most helpful for emerging MNCs expanding to institutionally distant countries. They employ a strategy tripod perspective—industry‐based, resource‐based, and institutional‐based views—and use the fuzzy‐set qualitative comparative analysis (fsQCA) research method.…”

“…Chen et al () and Liu et al () use a survey‐based measure based on Peng and Luo () to proxy CPC. This three‐item measure is based on the statement “Our firm has maintained good relationships with officials in (a) the central government, (b) local governments, (c) regulatory and supporting institutions, such as tax bureaus, commercial administration bureaus, and finance bureaus.” This measure has been very popular in China‐based research (e.g., Cao, Simsek, & Jansen, ; Cui et al, ).…”