How does regional institutional complexity affect MNE internationalization?

Jean-Luc Arregle (), Toyah L Miller, Michael A Hitt and Paul W Beamish
Additional contact information
Jean-Luc Arregle: EM Lyon Business School
Toyah L Miller: Jindal School of Management, The University of Texas at Dallas
Michael A Hitt: Mays Business School, Texas A&M University
Paul W Beamish: Ivey Business School, Western University

Journal of International Business Studies, 2016, vol. 47, issue 6, No 6, 697-722

Abstract: Abstract International business research is only beginning to develop theory and evidence highlighting the importance of supranational regional institutions to explain firm internationalization. In this context, we offer new theory and evidence regarding the effect of a region’s “institutional complexity” on foreign direct investment decisions by multinational enterprises (MNEs). We define a region’s institutional complexity using two components, regional institutional diversity and number of countries. We explore the unique relationships of both components with MNEs’ decisions to internationalize into countries within the region. Drawing on semiglobalization and regionalization research and institutional theory, we posit an inverted U-shaped relationship between a region’s institutional diversity and MNE internationalization: extremely low or high regional institutional diversity has negative effects on internationalization, but moderate diversity has a positive effect on internationalization. Larger numbers of countries within the region reduces MNE internationalization in a linear fashion. We find support for these predicted relationships in multilevel analyses of 698 Japanese MNEs operating in 49 countries within 9 regions. Regional institutional complexity is both a challenge and an opportunity for MNEs seeking advantages through the aggregation and arbitrage of individual country factors.

Keywords: regional strategy or strategies; institutions and international business; semiglobalization; foreign direct investment; mixed models (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (53)

Downloads: (external link)
http://link.springer.com/10.1057/jibs.2016.20 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:jintbs:v:47:y:2016:i:6:d:10.1057_jibs.2016.20

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/41267/PS2

DOI: 10.1057/jibs.2016.20

Access Statistics for this article

Journal of International Business Studies is currently edited by John Cantwell

More articles in Journal of International Business Studies from Palgrave Macmillan, Academy of International Business
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().