Institutional Effect on Firms’ Internationalization: From the Perspective of Development Zones

Yang Chan; He Xiaogang; Yan Jingbo

doi:doi:10.16538/j.cnki.fem.20210226.201

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Institutional Effect on Firms’ Internationalization: From the Perspective of Development Zones

Yang Chan1, He Xiaogang2, Yan Jingbo2

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Foreign Economics & Management Vol. 43, Issue 04, pp. 19 - 33 (2021) DOI:10.16538/j.cnki.fem.20210226.201

First published at:Apr 20, 2021

Summary

References

Summary

With the development of economic globalization, firms in emerging economies are motivated to implement internationalization strategy increasingly. This rapid expansion is not only due to the development of home economy, but also because of the domestic institutional environment. Institutional factors in home countries play an important role in shaping the international expansion behavior of firms in emerging market.

Accordingly, this paper takes the development zone as an analysis unit, and explores the local institutional environment optimization effect of development zones on firms’ internationalization by using the data of Chinese listed companies. Through empirical analysis, this paper gets the following conclusions: Firstly, settling in development zones will generate a positive institutional isomorphism and external enabling effect on firms’ internationalization behavior. That is, compared with firms outside the development zone, firms inside the zone are more inclined to implement internationalization strategy. The above conclusions still hold after using instrumental variables to deal with endogeneity and several robustness tests. Secondly, the positive internationalization effect is universal for different kinds of development zones. That is, settling in development zones of different levels, functions and locations all can improve firms’ motivation to carry out internationalization strategy significantly. Thirdly, the internationalization effect of development zones will be moderated by formal and informal institutional factors of higher levels. With the increase of local policy support and the deepening of regional embeddedness, the positive effect of development zones on firms’ internationalization will be strengthened significantly.

This paper has the following contributions and implications: Firstly, it discusses the influence of institution optimization on micro firms’ internationalization from the perspective of institutional isomorphism and institutional enabling. By converging firms’ internationalization practice in development zones to the logical framework of institutional theory, it not only enriches the related research of internationalization and institutional theory, but also effectively complements BTOF（Behavioral Theory of the Firm）. Secondly, it puts forward that firms’ internationalization is not purely institutional escapism, but the feedback of local institutional isomorphism and institutional enabling, which not only expands the research dimension of institutional environment, but also enriches the research scope of the relationship between internationalization and institutional environment. Finally, it deepens the interpretation of the economic effect of development zones and the growth motivation of micro firms’ internationalization behavior. The conclusions of this paper provide theoretical support for governments to promote the growth of real economy and firms’ internationalization by setting development zones.

Keywords

internationalization; institutional environment; development zones; policy support; embedded culture

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Cite this article

Yang Chan, He Xiaogang, Yan Jingbo. Institutional Effect on Firms’ Internationalization: From the Perspective of Development Zones[J]. Foreign Economics & Management, 2021, 43(4): 19-33.