Political risk, cultural distance, and outward foreign direct investment: Empirical evidence from large Chinese firms

Quer, Diego; Claver, Enrique; García, Laura Rienda

doi:10.1007/s10490-011-9247-7

Cited by 206 publications

(209 citation statements)

References 48 publications

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“…In addition, state support might have encouraged Brazilian multinationals to engage in joint ventures that they would not enter without such support, such as countries with high political risk, fragile institutions, or large cultural distance (e.g. Holburn & Zelner, 2010;Quer, Claver, & Rienda, 2012). In these situations, having the state as a shareholder or a major source of financing might act as a protection against those risks for the EMNE (Knutsen et al, 2011 Finally, in spite of the small number of Brazilian multinationals in the service sector, a reasonable number of them are in high-tech industries, which could explain the preference for joint ventures of service firms as a way to attain legitimacy in foreign markets, since Brazil has no reputation for producing technology.…”

Section: Discussionmentioning

confidence: 99%

Brazilian Multinationals' Ownership Mode: The Influence of Institutional Factors and Firm Characteristics

Ávila

Rocha

Silva

2015

BAR, Braz. Adm. Rev.

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This work investigates whether host countries institutional factors and firm characteristics can help the understanding of Brazilian multinationals' choices of ownership mode for their foreign direct investments (FDI). Brazil is a privileged locus for research on emerging market multinationals (EMNEs), given its growing stock of outward FDI. The paper contributes to a better understanding of the international strategic choices of EMNEs. First, the phenomenon under study is examined using the theoretical lenses of institutionalism. Second, the study looks at the relationship between state support and choice of ownership mode, a new issue in the area of international business. Third, differences between the decisions taken by manufacturing and service EMNEs are also examined. Fourth, the study focuses on an emerging country, Brazil. The quality of the regulatory environment of the host country, and differences in beliefs, cultural identity and management practices between the host country and the country of origin are factors of the institutional environment significantly related to the choice of ownership mode by Brazilian EMNEs. As to firm characteristics, our results show that state support favors the choice of joint ventures, and that service EMNEs also significantly prefer joint ventures, when compared to manufacturing firms. The findings also support the view that EMNEs are less sensitive to institutional weaknesses in host countries.

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Section: Discussionmentioning

confidence: 99%

Brazilian Multinationals' Ownership Mode: The Influence of Institutional Factors and Firm Characteristics

Ávila

Rocha

Silva

2015

BAR, Braz. Adm. Rev.

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show abstract

“…Political risks could be mostly institutional in nature, even though some emerge due to inherent factors in political environments like some other risks. Given the fact that firms make decisions when responding to different institutional environments, institutional theory becomes useful as a way of analyzing the moves from one country to another (Meyer, 2008;Peng, Wang, & Jiang, 2008;Quer et al, 2012). Some studies have tried to correlate political risk to institutional theory by explaining how it influences firms' decisions during internationalization (Dunning, 1980;Osabutey & Okoro, 2015;Quer et al, 2012).…”

Section: Theoretical Reviewmentioning

confidence: 99%

“…The legitimacy aspect of neoinstitutional theory will be considered in the context of this article since most firms habitually will want to achieve legitimacy in their host country (Meyer, 2008). The legitimacy viewpoint of neo-institutional theory could be used to explain, as firms move from either a developed economy to an emerging one or vice versa, how they respond to different institutional regulations to attain legitimacy (Meyer, 2008;Quer et al, 2012). Therefore, this suggests that the changes these institutions make in their regulations could result in the emergence of political risk in some markets, especially if there are weaknesses in institutions or if there is instability in the political environment.…”

Section: Theoretical Reviewmentioning

confidence: 99%

“…Invariably, institutional issues influence the behavior and choice of location of MNCs (Henisz & Swaminathan, 2008;Meyer, 2008;Peng et al, 2008;Quer et al, 2012). The regulations set by these government institutions are parameters that can determine the differences between a nonprofitable investment and a profitable investment.…”

Section: Theoretical Reviewmentioning

confidence: 99%

“…This means that each African market has specific political risk that differentiates one from another, therefore creating different scenarios for MNCs to assess (Bekaert et al, 2014;Quer, Claver, & Rienda, 2012). Sub-Saharan Africa is regarded as high risk, but there are significant intercountry variations in risk perception versus actual risk.…”

Section: Introductionmentioning

confidence: 99%

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Political risk assessment by multinational corporations in African markets: A Nigerian perspective

Mshelia

Anchor

2018

Thunderbird Intl Bus Rev

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Political risk assessment (PRA) is one of the determinants of foreign direct investment (FDI) and the competitiveness of multinational corporations (MNCs), yet little is known about its use in African markets. This study critically investigates the PRA techniques used by MNCs in Nigeria and their applicability. It uses a multimethod approach to analyze data collected from MNCs and the data set of the International Country Risk Guide (ICRG) PRA annual rating for Nigeria from 2011 to 2015. The findings reveal that most firms use qualitative, rather than quantitative, PRA techniques. Regional variations in the outcome of PRA within Nigeria could also contribute to the low use of quantitative techniques. This article identifies that firms are prepared to invest in Nigeria, in spite of high political risk, due to its economic and financial attractiveness. This article's findings offer some implications for practice with some suggestions on how it could influence firms’ internationalization and their conduct of PRA.

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Entry mode choices and overseas business performance: Evidence from the Chinese multinational enterprises

Zhang¹,

Wang

2021

Strategic Change

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This article adopts the extended transaction cost theory to analyze the entry mode choices of Chinese multinational enterprises and their effects on overseas business performance. Theoretical hypotheses, which are developed from the perspectives of asset specificity of parent companies and investment environment differences of host countries, are tested with sample data of 406 overseas subsidiaries of Chinese multinational enterprises from 2015 to 2017. The empirical results show that the overseas subsidiaries of Chinese multinational enterprises whose entry mode choices can be predicted by the extended transaction cost theory usually perform significantly better than those whose entry mode choices cannot be predicted by the extended transaction cost theory.

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Political risk, cultural distance, and outward foreign direct investment: Empirical evidence from large Chinese firms

Cited by 206 publications

References 48 publications

Brazilian Multinationals' Ownership Mode: The Influence of Institutional Factors and Firm Characteristics

Brazilian Multinationals' Ownership Mode: The Influence of Institutional Factors and Firm Characteristics

Political risk assessment by multinational corporations in African markets: A Nigerian perspective

Entry mode choices and overseas business performance: Evidence from the Chinese multinational enterprises

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