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Overcoming institutional voids in the home country for internationalization: an exploratory examination of institutional strategies of Indian MNEs

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  • Rishika Nayyar
  • Rajdeepa Maity

Abstract

This study draws upon the institution-based view to examine the role of market and non-market institutional strategies of multinational enterprises from emerging markets (EMNEs) in shaping their decisions on outward foreign direct investment (OFDI) (decision to engage in OFDI and volume of investment). The proposed conceptual framework is tested on the OFDI decisions of listed Indian firms during the period 2008–2018. The results of random effects logistic regression and tobit regression provide robust evidence for the positive impact of institutional substitution and institutional signaling strategy on the decision to engage in OFDI as well as the volume of investment. An institutional borrowing strategy affects only the decision to engage in OFDI, whereas an internalization strategy does not help EMNEs while internationalizing. The study contributes to the literature on institutional voids and institutional escapism by identifying the strategies that facilitate overseas expansion. It adds to the EMNE literature, which has focused lately on explaining the role of non-market strategies in internationalization. The results of the study indicate the need for policy initiatives geared towards filling information voids, strengthening legal systems and development of credit markets.

Suggested Citation

  • Rishika Nayyar & Rajdeepa Maity, . "Overcoming institutional voids in the home country for internationalization: an exploratory examination of institutional strategies of Indian MNEs," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    • Handle: RePEc:unc:tncjou:75
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