Host Countries’ Institutional Environment and Multinational Enterprises: Does Home-Host Developmental Status Matter?

This study examines the impact of host countries’ institutional effectiveness on the financial performance and innovation of multinational enterprises (hereafter MNEs). More specifically, we try to explore how MNEs behave in terms of performance and innovation when their home country and host country are at the same economic development status or otherwise. To achieve the aforementioned research objective, we collected data of MNEs and divided it into four categories based on home and host country’s economic development status; i.e., (I) MNEs from developing countries expand to other developing countries, (II) MNEs from developed countries expand to other developed countries, (III) MNEs from developing countries expand to developed countries, and (IV) MNEs from developed countries expand to developing countries. The findings of the study indicate that host countries’ institutional environment impacts the performance and innovation of MNEs. Such a relationship is more prominent among MNEs belong to the countries having the same economic developmental status as host countries. But, such association cannot be the same when MNEs from developed countries expanded their operations to the developing countries or vice versa. According to the best of our knowledge and belief, we did not find any relevant study which investigates that how and to what extent countries’ institutional environment affects the performance and innovation of MNEs when the home countries’ economic development status is the same and/or different from host countries’ economic development status.