The role of country alliances in reducing the transaction costs of internationalisation: evidence from Indian multinational enterprises

Buckley, Peter J.; Munjal, Surender; Enderwick, Peter; Forsans, Nicolas

doi:10.1093/cje/bew062

Cited by 19 publications

(28 citation statements)

References 84 publications

(95 reference statements)

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“…Thus, we controlled for language familiarity by a dummy variable which takes value 1 if English is the host country’s official or primary national language and 0 otherwise. This variable is also used in other papers focusing on India (Buckley et al , 2012a, 2012b).…”

Section: Methodsmentioning

confidence: 99%

Institutional distance, establishment mode choice and international experience: the case of Indian MNCs

García

Claver

Quer

2018

JABS

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Purpose Focusing on the growing importance of Indian multinational corporations in the past decades, this paper aims to understand how establishment mode decisions in a foreign market can differ depending on a series of factors. Specifically, the authors examine how institutional distance, including cultural distance and political risk, could affect these decisions, and how international acquisition experience could moderate this relationship. Design/methodology/approach The authors test their hypotheses using data from 114 outward foreign direct investments between 2000 and 2010. Findings The findings suggest that experience in international acquisitions increases the likelihood of subsequent acquisitions in high-risk and culturally distant countries. Originality/value By considering that the country of origin also matters, some differences among emerging-market multinational corporations (MNCs) may arise. Besides, since empirical research focusing on emerging-market MNCs is scarce, more empirical studies are needed to analyze the influence of cultural distance and political risk on some decisions. In the case of India, there are also additional motivations for analyzing those institutional factors. First, since this is a country with significant linkages to Western countries, it is interesting to know if the influence of cultural distance is similar or not. Second, there is a lack of empirical evidence on the relationship between political risk and establishment mode choice in the case of Indian MNCs. To fill this gap, the first aim of this paper is to analyze how cultural distance and political risk affect the establishment mode choice of Indian MNCs. Moreover, recognizing international experience to be an important factor in explaining international expansion, we focus on international experience interactions with sources of uncertainty inherent in the host market.

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Section: Methodsmentioning

confidence: 99%

Institutional distance, establishment mode choice and international experience: the case of Indian MNCs

García

Claver

Quer

2018

JABS

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“…The 'liability of foreignness' declines as these more distant countries are entered, and with learning on how to manage abroad, the firm's expansion pattern is determined. There are many empirical studies showing that regional, political and cultural similarity increases the flow of FDI by reducing the costs of internalising markets (Buckley, Munjal, Enderwick & Forsans, 2017;Brouthers, 2002Brouthers, , 2013.…”

Section: The Firm As Part Of a Global Systemmentioning

confidence: 99%

How Theory Can Inform Strategic Management Education and Learning

Buckley

2018

AMLE

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“…Critical and mainstream international business (IB) scholarship notes that a striking feature of globalization over the past decade has been the rise of emerging market multinational enterprises (EMNEs) and the corresponding increase in emerging economies’ (EEs) share of global outward foreign direct investment (OFDI) flows [1] (Buckley et al , 2017; Williamson, 2015; Yamin and Sinkovics, 2015). The unique internationalization patterns of EMNEs are reflected in the increasing number of cross-border acquisitions (CBAs) made in advanced economies (AEs), as opposed to other EEs, with the motive of acquiring resources and capabilities not available in the home country (Luo and Tung, 2007, 2018; Yoo and Reimann, 2017).…”

Section: Introductionmentioning

confidence: 99%

“…India provides an ideal research setting for this study because of the substantial variations in the institutional environment across its states (subnational regions) resulting from extensive institutional decentralization to state governments, following the economic liberalization reforms of 1991 (Kumar and Borbora, 2019; Khemani, 2003; Pradhan and Das, 2015; Subramanian, 2007). Furthermore, over the past two decades, Indian MNEs have engaged in rapid overseas expansion, predominantly in the form of CBAs in AEs (Buckley et al , 2017; Kumar et al , 2020).…”

Section: Introductionmentioning

confidence: 99%

Subnational institutions and EMNE acquisitions in advanced economies: institutional escapism or fostering?

Nayyar

Prashantham

2020

cpoib

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Purpose The purpose of this paper is to examine whether subnational market-supporting institutions in Indian states affect the likelihood of Indian multinational enterprises (MNEs) to undertake acquisitions in advanced economies (AEs) rather than emerging economies (EEs) and, if so, which mechanism – institutional fostering or escapism – underlies the phenomenon. Design/methodology/approach The paper uses a logistic regression model on a dataset of 647 firm-level cross-border acquisitions (CBAs) undertaken by Indian MNEs during the period 2010–2016. Findings The paper finds support for the institutional escapism mechanism, as opposed to the institutional fostering mechanism, underlying Indian MNEs’ acquisitions in AEs (rather than EEs). That is, firms headquartered in Indian states where market-supporting institutions (such as economic liberalization and efficiency of legal systems) are weak are more likely to undertake CBAs in AEs than in EEs as an escapist response to weak subnational institutions at home. Originality/value The paper highlights the relevance of the mainstream international business (IB) concept of emerging market multinational enterprises (EMNEs) internationalization to critical IB scholarship by examining subnational institutional influences on EMNEs’ foreign market choice between AEs and EEs. In particular, by providing evidence for the institutional escapism mechanism which has potential negative socioeconomic consequences in the region of the investing firm, the paper adds to critical IB research which places great emphasis on the examination of inequalities and draws attention to the EMNE context as a suitable setting for further research on internationalization from a critical perspective.

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The role of country alliances in reducing the transaction costs of internationalisation: evidence from Indian multinational enterprises

Cited by 19 publications

References 84 publications

Institutional distance, establishment mode choice and international experience: the case of Indian MNCs

Institutional distance, establishment mode choice and international experience: the case of Indian MNCs

How Theory Can Inform Strategic Management Education and Learning

Subnational institutions and EMNE acquisitions in advanced economies: institutional escapism or fostering?

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