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More policy is not always effective policy: How policy coherence affects firm internationalization

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  • Utesch-Xiong, Fredrik
  • Leymann, Gunnar
  • Lundan, Sarianna M.

Abstract

This paper aims to contribute to our understanding of the effects of home country policy change on the internationalization of EMNEs. Our analysis is based on a unique data set of Chinese outward FDI policies in 1979–2019 that enables us to examine policy coherence in three dimensions: signal ambiguity, instrument expansion, and scope expansion. By analyzing Chinese POEs between 2012 and 2018, we find that more ambiguous policy signals reduce the likelihood of cross-border M&As. Furthermore, we find that the expansion of policy instruments and policy scope also negatively affect internationalization. These effects become weaker over time, and a smaller sample of SOEs shows no susceptibility to instrument and scope expansion. We conclude that while the content of policy is essential, the coherence of the policy process can have an impact that may overwhelm the positive effects of policies if the firms lack policy awareness, or the implementation exceeds their short-term capacity to adjust. Thus, more policy is not always more effective policy.

Suggested Citation

  • Utesch-Xiong, Fredrik & Leymann, Gunnar & Lundan, Sarianna M., 2024. "More policy is not always effective policy: How policy coherence affects firm internationalization," International Business Review, Elsevier, vol. 33(3).
    • Handle: RePEc:eee:iburev:v:33:y:2024:i:3:s096959312200110x
    DOI: 10.1016/j.ibusrev.2022.102082
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