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

Home > All Issues > 2021 > No.04 > Article Details

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

Yang Chan1, He Xiaogang2, Yan Jingbo2

Author Affiliations

Full Article | PDF Article(646.4 KB) View

3704

4261

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

[1] Chai Zeyang, Kong Lingcheng. Do the Enterprises of Development Zone Have Productivity Advantages? Based on a Quasi-experiment of the Upgrading Policy of Development Zones[J]. Business Management Journal, 2020, 42(10): 59-76.

[2] Li Ben, Wu Lihua. Development Zone and Firms’ Growth: Research on Heterogeneity and Mechanism [J]. China Industrial Economics, 2018(4): 79-97.

[3] Li Lixing, Shen Guangjun. Special Economic Zone, l Comparative Advantage and Industrial Structural Transformation[J]. China Economic Quarterly, 2015, 14(3): 885-910.

[4] Wei Jiang, Wang Ding, Liu Yang. Liability of Origin and Legalization Strategy——A Case Study of Cross-border Mergers and Acquisitions of Enterprises in Emerging Economies [J]. Management World, 2020, 36(3): 101-120.

[5] Yang Chan, He Xiaogang, Yang Hao, Jia Zhihan. Does Development Zone Promote or Hinder Firm Internationalization? A Literature Review[J].Foreign Economics and Management, 2020(4):139-152.

[6] Zhang Huan. Perception of Institutional Heterogeneity and Internationalization Behavior of Firms from Emerging Market [J]. Journal of Sun Yat-sen University (Social Science Edition), 2020, 60(3): 180-195.

[7] Zheng Wei. The Influence of Internationalization on Open Innovation——Empirical Evidence from Chinese Manufacturing Listed Companies [J]. Journal of International Trade, 2020(10): 51-66.

[8] Zhong Xiaotong, Zhou Lianxi, Luo Huiying. The Impact of Home Country Determinants on the Internationalization of New Ventures: A Review and Prospects [J]. Foreign Economics and Management, 2019, 41(8): 3-16.

[9] Alder S, Shao L, Zilibotti F. Economic reforms and industrial policy in a panel of Chinese cities[J]. Journal of Economic Growth,2016, 21(4): 305-349.

[10] Alessandri T M, Cerrato D, Eddleston K A. The mixed gamble of internationalization in family and nonfamily firms: The moderating role of organizational slack[J]. Global Strategy Journal,2018, 8(1): 46-72.

[11] Angulo-Ruiz F, Pergelova A, Wei W X. How does home government influence the internationalization of emerging market firms? The mediating role of strategic intents to internationalize[J]. International Journal of Emerging Markets,2019, 14(1): 187-206.

[12] Barkema H G, Bell J H J, Pennings J M. Foreign entry, cultural barriers, and learning[J]. Strategic Management Journal,1996, 17(2): 151-166.

[13] Cheng T. Special economic zones: A catalyst for international trade and investment in unsettling times?[J]. Journal of World Investment & Trade,2019, 20(1): 32-67.

[14] Fuentelsaz L, González C, Maicas J P. Formal institutions and opportunity entrepreneurship: The contingent role of informal institutions[J]. Business Research Quarterly,2019, 22(1): 5-24.

[15] Hossfeld H. Legitimation and institutionalization of managerial practices: The role of organizational rhetoric[J]. Scandinavian Journal of Management,2018, 34(1): 9-21.

[16] Usman K. China’s special economic zones, Hainan province new free trade zone: Review of policies that minimize the regional gap[J]. Journal of Management and Economic Studies,2020, 2(2): 99-111.

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.