Institutional Determinants of Outward Foreign Direct Investment from Emerging Economies: A Home-Country Perspective

Amal, Mohamed; Tomio, Bruno Thiago

doi:10.1057/9781137446350_3

Cited by 6 publications

(5 citation statements)

References 39 publications

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“…Since the 1950s, scholars from different areas of business have explored several factors such as labor cost, infrastructure quality, agglomeration effect, openness, market size and economic growth as drivers of inbound FDI (Culem, 1988; Biswas, 2002; Mayer and Mucchielli, 1998; Kyrkilis and Pantelidis, 2003). In more recent literature, scholars have suggested that institutional distance between home and host countries also is another important factor impacting FDI (Amal and Tomio, 2015).…”

Section: Theory and Hypothesesmentioning

confidence: 99%

The effect of the digital readiness of economies on international M&A performance

Gharagozloo

Nair

Chen

2020

JEIM

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PurposeUnderstanding the mechanism through which digital economy is significantly impacting all dimensions of global economy has become a rising priority in recent years. The purpose of this paper is to investigate the critical role of digital readiness of economies around the world on the performance of international M&As as one of the major corporate strategies for firms' global expansion. We also study circumstances under which digital readiness of an economy matters to international M&As.Design/methodology/approachThe authors examined how digital readiness superiority (or inferiority) of the United States in comparison with host countries impact capital market reaction to international M&As announced by US public companies. To do this study, analysis was run on a sample of 1,393 IMAs by publicly traded US firms during the 2010–2016 period.FindingsThe study reveals that those public US companies that target companies in countries, in which the US has superior digital readiness to them, show better performance in terms of investors' reaction (capital market reaction) to the announcement of international M&As. In fact, markets will look at the superiority of US digital readiness to target country as an opportunity for transferring digital capabilities. Moreover, these patterns are pronounced in those M&A deals in which the acquiring company is from high-tech industry. However, interestingly when US companies already have a profitable growth track record or when acquirer and target are in the same industry, the market reacts negatively to this digital superiority.Originality/valueOverall, this study contributes to a better understanding of the mechanisms through which digitalization of economies impact the performance of multinational enterprises. It adds to the information management literature on corporate global strategy and is one of the first to examine the role of digital readiness on international M&As performance.

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Section: Theory and Hypothesesmentioning

confidence: 99%

The effect of the digital readiness of economies on international M&A performance

Gharagozloo

Nair

Chen

2020

JEIM

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“…For example, knowledge capital theory (Carr et al, 2001) argues that horizontal diversification is more prevalent when there is little difference between the home market and host market, while vertical diversification happens more frequently in countries in which the activities of the value chain can be completed with lower cost without sacrificing quality. Amal and Tomio (2015) argue that, based on adopting an institutional perspective, FDI flows are related to the institutional distance between home and host countries. A stream of studies supports that in addition to the capital richness, institutional distances such as distances of culture, government and regulations between home and host countries matter as well (Gomez-Mejia and Palich, 1997;Tihanyi et al, 2005;Cuervo-Cazurra and Genc, 2011;Zaheer et al, 2012).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…Amal and Tomio (2015) argue that, based on adopting an institutional perspective, FDI flows are related to the institutional distance between home and host countries. A stream of studies supports that in addition to the capital richness, institutional distances such as distances of culture, government and regulations between home and host countries matter as well (Gomez-Mejia and Palich, 1997; Tihanyi et al , 2005; Cuervo‐Cazurra and Genc, 2011; Zaheer et al , 2012).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

The effect of change readiness of economies on international M&A flows

Gharagozloo

Chen

Pour³

2021

RIBS

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Purpose The purpose of this paper is to examine how a country’s change readiness impacts international mergers and acquisitions (M&A) capital flows on a national level toward host countries. The authors unpack the construct of change readiness and identify how its different dimensions impact international M&As (IMA). The authors provide a theoretical framework based on the resource-based view to facilitate an understanding of this concept. Design/methodology/approach The authors used a fixed-effect analysis to study a sample of 2,970 IMAs announced by publicly traded US companies during 2013–2017. Findings The authors propose that higher levels of change readiness would help foreign firms to cope with risks and uncertainties generated by the changes and shocks in the environment of a host country. The authors find support for their hypotheses showing that higher levels of change readiness increase the number of IMAs that a country receives every year. This characteristic of the host country shows a significant influence, especially in technology-intensive IMA flows. Practical implications This study provides implications for business executives and policymakers both in terms of risk mitigation strategies and investment attraction. Understanding the fact that when it comes to foreign investment in the form of IMAs business executives are aware of the importance of change readiness in host countries might lead to motivate the governments and host country officials to provide better infrastructure to boost the change readiness in their economy. Originality/value Overall, this study improves our knowledge about mechanisms through which change readiness of host countries might impact firms' strategies for international expansion. As we are indeed living in the era of global disruptions and strong shocks caused by political turmoil, climate change and the spread of new diseases, this study contributes to the literature on risk mitigation in international business and is one of the first to look closely at the role of host countries' change readiness and the effect it might have on attracting international M&As.

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Section: Introductionmentioning

confidence: 99%

“…The research uses a data set of 181 foreign subsidiaries of Brazilian multinationals. Due to the size and dynamism of its economy, the number of firms with international activities and its neo-liberal policies, Brazil is considered an interesting context (Amal and Tomio, 2015; Hennart et al , 2017) for testing hypotheses concerning multilatinas’ international activities. Building on prior research on EMNEs (Akdeniz and Talay, 2022; Valdés-Llaneza et al , 2021), this study posits that multilatinas do better when using entry modes involving foreign partnerships and acquisitions because these modes provide access to knowledge, resources and legitimacy.…”

Section: Introductionmentioning

confidence: 99%

Multilatinas’ foreign divestment and host country institutional uncertainty: is there a best entry strategy?

da Fonseca,

da Rocha,

Ferreira

2023

EBR

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Purpose This paper aims to investigate the divestment behavior of emerging market multinationals from Latin America – multilatinas – by examining how their foreign market entry decision impacts the likelihood of subsidiary divestment. Design/methodology/approach The hypotheses are tested using Cox’s proportional hazard rate model in a longitudinal database of Brazilian multinational companies established in 43 countries. Findings Results indicate that these subsidiaries can thrive in environments that bear similarities to their home country, being less likely to divest in institutionally weak countries. Contrary to developed country multinationals, these firms benefit from foreign entry decisions that entail handling partnerships abroad; thus, wholly-owned greenfield (WOGF) investments have a higher likelihood of being divested. Originality/value To the best of the authors’ knowledge, this paper is the first to analyze foreign divestment from multilatinas, accounting for how entry mode strategy and host country institutions may impact these firms’ de-internationalization.

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Institutional Determinants of Outward Foreign Direct Investment from Emerging Economies: A Home-Country Perspective

Cited by 6 publications

References 39 publications

The effect of the digital readiness of economies on international M&A performance

The effect of the digital readiness of economies on international M&A performance

The effect of change readiness of economies on international M&A flows

Multilatinas’ foreign divestment and host country institutional uncertainty: is there a best entry strategy?

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