How does regional institutional complexity affect MNE internationalization?

Jean-Luc Arregle, Toyah L. Miller, Michael A. Hitt, Paul W. Beamish

Research output: Contribution to journalArticle

23 Citations (Scopus)

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 onsemiglobalization 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 positiveeffect 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.
LanguageEnglish
Pages697-722
JournalJournal of International Business Studies
Volume47
Issue number6
Early online date3 Aug 2016
DOIs
Publication statusE-pub ahead of print - 3 Aug 2016

Fingerprint

Industry
Institutional complexity
Internationalization
Multinational enterprises
Agglomeration
Institutional diversity
Regionalization
Investment decision
International business research
Arbitrage
Foreign direct investment
Japanese multinational enterprises
Inverted-U
Institutional theory
Factors

Keywords

  • regional strategy or strategies
  • institutions and international business
  • semiglobalization
  • foreign direct investment
  • mixed models

Cite this

Arregle, Jean-Luc ; Miller, Toyah L. ; Hitt, Michael A. ; Beamish, Paul W. / How does regional institutional complexity affect MNE internationalization?. In: Journal of International Business Studies. 2016 ; Vol. 47, No. 6. pp. 697-722.
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How does regional institutional complexity affect MNE internationalization? / Arregle, Jean-Luc; Miller, Toyah L.; Hitt, Michael A.; Beamish, Paul W.

In: Journal of International Business Studies, Vol. 47, No. 6, 03.08.2016, p. 697-722.

Research output: Contribution to journalArticle

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