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Emerging economies and institutional quality: Assessing the differential effects of institutional distances on ownership strategy

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  • Liou, Ru-Shiun
  • Chao, Mike Chen-Ho
  • Yang, Monica

Abstract

The current study contributes to the institution-based view of internationalization that is contingent upon the home country development. We examine the differential effects of formal and informal institutions on emerging market multinational corporations’ (EMNCs) ownership strategies. Facing a large informal institutional distance that represents diverse cultural beliefs, EMNCs opt for a low ownership position that alleviates legitimacy threat, whereas a large formal institutional distance leads EMNCs to establish dominant ownership control. EMNC home market conditions, including market size and regulatory institutional quality, further explain the differential effects of institutional distances.

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  • Liou, Ru-Shiun & Chao, Mike Chen-Ho & Yang, Monica, 2016. "Emerging economies and institutional quality: Assessing the differential effects of institutional distances on ownership strategy," Journal of World Business, Elsevier, vol. 51(4), pages 600-611.
    • Handle: RePEc:eee:worbus:v:51:y:2016:i:4:p:600-611
    DOI: 10.1016/j.jwb.2016.03.001
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