The Role of FDI Motives in the Link between Institutional Distance and Subsidiary Ownership Choice by Emerging Market Multinational Enterprises

Abstract

This study advances the limited generalizability of previous studies that have focused on developed market multinational enterprises and explores the link between institutional distance and ownership choice of emerging market multinational enterprises (EMNEs). Such studies in the EMNE context have been rare, and we provide key theoretical explanations for EMNEs’ distinct foreign direct investment motives to act as important contingencies in the link between institutional distance and EMNEs’ ownership choices. Analyses of longitudinal data of Chinese firms’ internationalization from 2001 to 2017 reveal that the higher the institutional distance, the lower the level of EMNE subsidiary ownership control with market‐seeking motives; while the higher the institutional distance, the higher the level of EMNE subsidiary ownership control with knowledge‐seeking motives.