How Do Sub-national institutional constraints Impact Foreign Firm Performance?

Abstract

This paper examines the impact of sub-national institutions on the performance of foreign firms in China. Building on institutional theory, we envisage that the negative effect of sub-national institutional constraints is moderated by firm size and age, entry mode, and market orientation. Our hypotheses are tested on a large-firm-level dataset of about 29,000 foreign firms in 120 cities in China within the period of 1999–2005. We find that firm size and age both have a diminishing positive impact on foreign firm performance; moreover, there is a U-shaped relationship between firm age and foreign firm performance in cities with higher level institutional constraints. We also find that joint ventures help mitigate the negative impact of sub-national institutional constraints on foreign firm performance when the level of institutional constraints is higher.

Citation

(2017). How Do Sub-national institutional constraints Impact Foreign Firm Performance?. International Business Review, 555-565. https://doi.org/10.1016/j.ibusrev.2016.11.004

• Acceptance Date: Nov 16, 2016
• Publication Date: Jun 1, 2017
• Journal: International Business Review
• Print ISSN: 0969-5931
• Publisher: Elsevier
• Pages: 555-565
• DOI: https://doi.org/10.1016/j.ibusrev.2016.11.004
• Keywords: sub-national institutions, institutional theory, foreign firm, firm performance, China
• Publisher URL: http://dx.doi.org/10.1016/j.ibusrev.2016.11.004