Toward a new model : integration of the resource-based view and institutional theory to explain the heterogeneity of MNE's outward FDI strategy and performance

Li, Linjie (2017) Toward a new model : integration of the resource-based view and institutional theory to explain the heterogeneity of MNE's outward FDI strategy and performance. Doctoral thesis, Birkbeck, University of London.

Abstract

This thesis develops and tests a new model which integrates the resource-based view (RBV) and institutional theory to explain MNEs, especially emerging economy MNEs’ (EMEs) outward foreign direct investment (OFDI) strategy and performance. Existing literature has highlighted the significance as well as limitations of the RBV and IT in an international business context. Recently scholars argue that the RBV and IT should be combined for better applicability in MNE study. However, so far, there has been no work that comprehensively addresses the following questions: What are the limitations of the RBV and IT in the international business context? What are their boundaries and overlaps for MNE study? In the international business context, why should the RBV and IT be integrated and how can they be integrated to better explain MNEs’ OFDI strategy and performance? In order to fill the above research gaps, this thesis firstly discusses the limitations, boundaries, and integration mechanisms of the RBV and IT in an international business context, based on which, a new model integrating the RBV and IT is developed to explain/predict MNEs, especially EMEs’ OFDI strategy and performance. Theoretical propositions are proposed in the theory-building chapter (chapter 2). To test the above new model, three specific empirical studies (chapters 3, 4 and 5) are conducted. As a baseline of the model, chapter 3 examines how MNEs’ resources, institutional conditions and OFDI strategies affect their performance directly and separately. Specially, controlling for EMEs’ self-selection into the global investment market, chapter 3 investigates how EMEs’ resources, institutional conditions, and OFDI strategies affect their productivity gain from OFDI. The propensity-score matching and difference-in-difference (DID) approaches are combined to test the theoretical framework, utilizing unique data on Chinese manufacturing firms over the sample period 2002–2008. The results provide insights into this topic by indicating that EMEs without state ownership but with stronger absorptive capability gain higher and sustainable productivity effects. Such gains are lagged if merger and acquisition (M&A) are employed as an entry strategy, and gains are higher for EMEs investing in developed than in less developed countries. Policy and managerial implications are discussed. Chapters 4 and 5 investigate the determinants and impact of MNE subsidiaries’ bribing strategy in corrupt contexts. An analytical framework is built based on an integration of institutional and resource-based constructs, and tested using firm-level data from 2210 subsidiaries operating in Africa. Controlling for the subsidiaries’ self-selection to bribe, the findings, based on the Tobit, Heckman two-step, OLS and IV regression results, indicate that the heterogeneity of MNE subsidiaries’ resources and perceived corrupt pressures lead to differing bribery strategies in response to host country corruption, and these two variables then interactively moderate the impact of bribery on MNES performance. MNE subsidiaries’ perceived level of host country corruption produces a positive effect on their choice of bribery. But the subsidiaries’ home-country anti-corruption levels and their holding of internationally recognized quality certification (IQC) reduce MNE subsidiaries’ willingness to pay bribes. A more interesting finding is that, after controlling for MNE subsidiaries’ perceived pressures of corruption in host countries, MNE subsidiaries’ home-country anti-corruption levels and MNE subsidiaries’ holding of IQC negatively moderate bribery’s effectiveness on performance. Theoretical and managerial implications of the findings are discussed.

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