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Institutional compatibility and the internationalization of Chinese SOEs: The moderating role of home subnational institutions

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  • Li, Jing
  • Xia, Jun
  • Shapiro, Daniel
  • Lin, Zhouyu

Abstract

This study investigates the outward foreign direct investment (OFDI) of state-owned enterprises (SOEs) through the lens of the mechanism of institutional compatibility. Drawing on institutional theory, we argue that institutional compatibility (thus legitimacy) at home and institutional incompatibility (thus lack of legitimacy) abroad reduce SOEs’ OFDI activities. However, we also argue that home-country subnational factors (coercive, normative, and mimetic forces) provide a potentially offsetting effect. Using a sample of publicly listed Chinese firms, we find that coercive and mimetic forces generated from home subnational institutions reduce the negative effect of state ownership on OFDI activity.

Suggested Citation

  • Li, Jing & Xia, Jun & Shapiro, Daniel & Lin, Zhouyu, 2018. "Institutional compatibility and the internationalization of Chinese SOEs: The moderating role of home subnational institutions," Journal of World Business, Elsevier, vol. 53(5), pages 641-652.
    • Handle: RePEc:eee:worbus:v:53:y:2018:i:5:p:641-652
    DOI: 10.1016/j.jwb.2018.02.002
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