How do sub-national institutional constraints impact foreign firm performance?

Xiaoying Li and Laixiang Sun

International Business Review, 2017, vol. 26, issue 3, 555-565

Abstract: This paper examines the impact of sub-national institutions on the performance of foreign firms in China. Building on institutional theory, we envisage that the negative effect of sub-national institutional constraints is moderated by firm size and age, entry mode, and market orientation. Our hypotheses are tested on a large-firm-level dataset of about 29,000 foreign firms in 120 cities in China within the period of 1999–2005. We find that firm size and age both have a diminishing positive impact on foreign firm performance; moreover, there is a U-shaped relationship between firm age and foreign firm performance in cities with higher level institutional constraints. We also find that joint ventures help mitigate the negative impact of sub-national institutional constraints on foreign firm performance when the level of institutional constraints is higher.

Keywords: Sub-national institutions; Institutional theory; Foreign firm; Firm performance; China (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:iburev:v:26:y:2017:i:3:p:555-565

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DOI: 10.1016/j.ibusrev.2016.11.004

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