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Political Connections, Home Formal Institutions, and Internationalization: Evidence from China

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  • Du, Xingqiang
  • Luo, Jin-hui

Abstract

This study draws on the resource dependence theory and institution-based view to examine political connections in the home market and home formal institutions for their impact on the internationalization of emerging market firms in the context of China. The results suggest that political connections at home may prevent emerging market firms from implementing internationalization strategies by reducing the dependence constraints imposed by local governments and foreign firms, whereas home formal institutional development may promote the strategy transition of emerging market firms from building political connections to international expansion and also reduce the negative impact of political connections. Overall, our findings indicate that political connections and formal institutions at home play an important role in shaping emerging market firms’ strategies of outward internationalization.

Suggested Citation

  • Du, Xingqiang & Luo, Jin-hui, 2016. "Political Connections, Home Formal Institutions, and Internationalization: Evidence from China," Management and Organization Review, Cambridge University Press, vol. 12(1), pages 103-133, March.
    • Handle: RePEc:cup:maorev:v:12:y:2016:i:01:p:103-133_00
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    Cited by:

    1. Zhang, Chenyan & Zheng, Wei & Hong, Junjie & Kafouros, Mario, 2022. "The role of government policies in explaining the internationalization of Chinese firms," Journal of Business Research, Elsevier, vol. 141(C), pages 552-563.
    2. Tao Bai & Stephen Chen & Xiao He, 2019. "How Home-Country Political Connections Influence the Internationalization of Service Firms," Management International Review, Springer, vol. 59(4), pages 541-560, August.
    3. Dai, Weiqi & Si, Steven, 2018. "Government policies and firms' entrepreneurial orientation: Strategic choice and institutional perspectives," Journal of Business Research, Elsevier, vol. 93(C), pages 23-36.
    4. Wales, W. & Shirokova, G. & Bogatyreva, K. & Germain, R., 2018. "Foreign Motivations: How International Exposure Shapes Firms' Entrepreneurial Orientation in Emerging Market," Working Papers 15121, Graduate School of Management, St. Petersburg State University.
    5. Bai, Tao & Chen, Stephen & Xu, Youzong, 2021. "Formal and informal influences of the state on OFDI of hybrid state-owned enterprises in China," International Business Review, Elsevier, vol. 30(5).
    6. Heng Liu & Jin-hui Luo & Victor Cui, 2018. "The Impact of Internationalization on Home Country Charitable Donation: Evidence from Chinese Firms," Management International Review, Springer, vol. 58(2), pages 313-335, April.
    7. Jianghua Zhou & Rui Wu & Jizhen Li, 2019. "More ties the merrier? Different social ties and firm innovation performance," Asia Pacific Journal of Management, Springer, vol. 36(2), pages 445-471, June.
    8. Liu, Heng & Luo, Jin-hui, 2022. "Legacy of ideology: The enduring effect of CEOs’ socialist ideological imprint on private firms’ employee-related CSR," Journal of Business Research, Elsevier, vol. 147(C), pages 491-504.
    9. Garry D. Bruton & David Ahlstrom & Juanyi Chen, 2021. "China has emerged as an aspirant economy," Asia Pacific Journal of Management, Springer, vol. 38(1), pages 1-15, March.
    10. Guangyuan Guo & Jing Li & Dan Wang & Lina Zhang, 2022. "Political connection, contract intensity, and OFDI: Evidence from China," Journal of Economic Surveys, Wiley Blackwell, vol. 36(3), pages 534-557, July.
    11. Ziyi Wei & Quyen T. K. Nguyen, 2020. "Chinese Service Multinationals: The Degree of Internationalization and Performance," Management International Review, Springer, vol. 60(6), pages 869-908, December.
    12. Jin-hui Luo & Zeyue Huang & Ruichao Zhu, 2021. "Does media coverage help firms “lobby” for government subsidies? Evidence from China," Asia Pacific Journal of Management, Springer, vol. 38(1), pages 259-290, March.
    13. Sharma, Piyush & Cheng, Louis T.W. & Leung, T.Y., 2020. "Impact of political connections on Chinese export firms' performance – Lessons for other emerging markets," Journal of Business Research, Elsevier, vol. 106(C), pages 24-34.
    14. Vikrant Shirodkar & Namita Shete, 2021. "The Impact of Domestic CSR on the Internationalisation of Emerging-Market Multinational Enterprises: Evidence from India," Management International Review, Springer, vol. 61(6), pages 799-829, December.
    15. Shirodkar, Vikrant & Batsakis, Georgios & Konara, Palitha & Mohr, Alexander, 2022. "Disentangling the effects of domestic corporate political activity and political connections on firms’ internationalisation: Evidence from US retail MNEs," International Business Review, Elsevier, vol. 31(1).
    16. Zhang, Yi & Liu, Chun & Wang, Ting, 2020. "Direct or indirect? The impact of political connections on export mode of Chinese private enterprises," China Economic Review, Elsevier, vol. 61(C).
    17. Weiqi Dai & Mingqing Liao, 2019. "Entrepreneurial attention to deregulations and reinvestments by private firms: Evidence from China," Asia Pacific Journal of Management, Springer, vol. 36(4), pages 1221-1250, December.
    18. Ryan W. Tang & Chengli Shu & Kevin Z. Zhou, 2022. "State ownership of Chinese firms and their outward foreign direct investment: Political and economic contingencies," Asia Pacific Journal of Management, Springer, vol. 39(3), pages 1097-1123, September.
    19. Zheng, Weiting & Ang, Siah Hwee & Singh, Kulwant, 2022. "The interface of market and nonmarket strategies: Political ties and strategic competitive actions," Journal of World Business, Elsevier, vol. 57(4).
    20. Wang, Yanyu & You, Qinghua & Qiao, Yuanbo, 2022. "Political genes drive innovation: Political endorsements and low-quality innovation," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 407-417.
    21. Zhang, Weike & Zhang, Xueyuan & Tian, Xiaoli & Sun, Fengwei, 2021. "Economic policy uncertainty nexus with corporate risk-taking: The role of state ownership and corruption expenditure," Pacific-Basin Finance Journal, Elsevier, vol. 65(C).
    22. Lixin Zhou & Yan Han & Chaoli Gou, 2019. "Influence of Family Involvement on Family Firm Internationalization: The Moderating Effects of Industrial and Institutional Environments," Sustainability, MDPI, vol. 11(20), pages 1-17, October.
    23. Tariq H. Ismail & Mohamed El-Deeb & Yasser Tawfik Halim, 2022. "Do related party transactions affect the relationship between political connections and firm value? Evidence from Egypt," Future Business Journal, Springer, vol. 8(1), pages 1-12, December.

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