Institutional distance, slack resources, and foreign market entry

Róisín Donnelly (), Saptarshi Purkayastha (), Tatiana S. Manolova () and Linda F. Edelman ()
Additional contact information
Róisín Donnelly: Tilburg University
Saptarshi Purkayastha: Indian Institute of Management Calcutta
Tatiana S. Manolova: Bentley University
Linda F. Edelman: Bentley University

Journal of International Business Studies, 2024, vol. 55, issue 2, No 5, 194-211

Abstract: Abstract Traditional theories from the international business and strategy literatures have posited that institutional distance constrains firm internationalization and that slack financial and managerial resources can be redeployed to help overcome this distance and facilitate growth. However, are slack resources equally effective when entering host markets of different institutional quality? Combining an institutional economics’ view of distance with a Penrosean perspective on resources, we argue that financial slack allows firms “to pay their way” into more institutionally developed markets, whereas managerial slack allows firms “to work their way” into less institutionally developed markets. From data on the internationalization of 307 Indian computer software companies over 16 years, we find support for our hypotheses when considering formal institutional distance. We also find that managerial slack mitigates informal institutional distance, irrespective of the direction of internationalization. Additional robustness tests, using propensity score matching, and an alternative sample of 3600 manufacturing firms from 49 countries, support our main results. Our findings suggest that slack is not a generic panacea for overcoming institutional distance, in that the effectiveness of each type of slack is dependent on both the direction of entry and the type of institutional distance to be overcome, formal or informal.

Keywords: Resource-based view; Resource-based theory; Internationalization theories and foreign market entry; Emerging market multinationals; Institutions and international business; Slack resources; Institutional economics; Location choice (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1057/s41267-023-00647-6 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:55:y:2024:i:2:d:10.1057_s41267-023-00647-6

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

DOI: 10.1057/s41267-023-00647-6

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 ().