The role of perceived institutional distance in foreign ownership level decisions of new MNEs

Prior research has viewed institutional distance as a critical factor in decisions about ownership level in foreign affiliates. Research has also long highlighted the relevance of distance perceptions in internationalization decisions. Yet, so far, little attention has been devoted to how decision makers perceive institutional differences across countries and how these perceptions may affect ownership level decisions. We build on international business, institutional, and upper echelons literature to explore how managerial perceptions of formal and informal institutional differences affect ownership levels in foreign affiliates. Empirical findings from a survey of Polish “new MNEs” indicate that the negative effect of institutional distance perceptions on ownership level in foreign affiliates changes depending on the level of institutional development of a host country relative to the home country.