What drives outward FDI from emerging economies? The interplay between exploration orientation and home‐country institutional changes

• Date: 01 December 2017
• Published date: 01 December 2017
• DOI: http://doi.org/10.1002/cjas.1447

What drives outward FDI from emerging

economies? The interplay between

exploration orientation and home-country

institutional changes

Byung Il Park

HUFS Business School, Hankuk University of Foreign

Studies

Shufeng (Simon) Xiao*

HUFS Business School, Hankuk University of Foreign

Studies

Abstract

We examine how home-country government involvement and

institutional environments interact with the exploration

orientation of emerging market f‌irms (EMFs) and how these

interrelationships affect the outward foreign direct

investment (FDI) behaviours of EMFs. By using a unique

data set of Chinese f‌irms, we f‌ind that exploration

orientation has a positive effect on the outward FDI

propensity and outward FDI intensity of Chinese f‌irms.

The f‌indings further demonstrate that government support

can enhance the independent effects of exploration

orientation on outward FDI propensity and outward FDI

intensity, but such effects will weaken when a high degree

of state ownership exists within these f‌irms. No evidence is

found that regional institutional development moderates

the effect of exploration orientation on outward FDI

behaviours. Copyright © 2017 ASAC. Published by John

Wiley & Sons, Ltd.

Keywords: emerging market f‌irms, exploration,

institutions, government involvement, institutional

development, China

Résumé

Dans cet article, nous examinons les interactions entre,

d’une part, la participation du gouvernement du pays

d’origine et les environnements institutionnels et, d’autre

part, l’orientation exploratoire des entreprises des marchés

émergents (EMF). Nous montrons comment ces interactions

inf‌luencent les comportements externes des EMF en matière

d’investissements directs étrangers (FDI). À partir d’un

ensemble de données spécif‌iques aux entreprises chinoises,

nous montrons que l’orientation exploratoire a un impact

positif sur la propension et l’intensité externes des FDI des

entreprises chinoises. Les résultats révèlent également que

l’appui gouvernemental peut renforcer les effets

indépendants de l’orientation exploratoire sur la propension

et l’intensité externes des FDI. Toutefois, ces effets

diminuent lorsqu’àl’intérieur de ces entreprises, le secteur

nationalisé est important. Par ailleurs, rien ne permet

d’aff‌irmer que le développement institutionnel régional

modère les effets de l’orientation exploratoire sur les

comportements externes des FDI. Copyright © 2017 ASAC.

Published by John Wiley & Sons, Ltd

Mots-clés: entreprises des marches émergents, exploration,

institutions, participation gouvernementale, développement

institutionnel, Chine

This study addresses the question of why emerging

market f‌irms (EMFs) go abroad and undertake outward

foreign direct investment (FDI). Conventional international

business and strategic management literature provides

different theoretical underpinnings to interpret the existence

and growth of multinational enterprises (MNEs) and to

explain why such enterprises engage in outward FDI.

Internalization theory, especially its eclectic paradigm

version, is probably the most inf‌luential and dominant

framework.

1

Furthermore, a large body of research draws

from internalization-based FDI theory to investigate the

factors that drive the FDI of MNEs. Such research is

generally predicated on the fundamental assumption that

Acknowledgements: This work was supported by Hankuk University of

Foreign Studies Research Fund.

*Please address correspondence to: Shufeng (Simon) Xiao, Associate

Professor, HUFS Business School, Hankuk University of Foreign Studies,

107, Imun-ro, Dongdaemun-gu, Seoul, Korea 130-791. Email:

bizsxiao@hufs.ac.kr

Canadian Journal of Administrative Sciences

Revue canadienne des sciences de l’administration

34: 387–400 (2017)

Published online 20 June 2017 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/CJAS.1447

Can J Adm Sci

34(4), 387–400 (2017)Copyright © 2017 ASAC. Published by John Wiley & Sons, Ltd. 387