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Firms’ FDI ownership: The influence of government ownership and legislative connections

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Abstract

The level of ownership in an overseas subsidiary has been an important issue in international business. Existing literature, based on transaction cost theory, predicts that firms prefer higher ownership for subsidiaries located in favorable foreign institutional environments. We propose two moderating factors to this prediction: governments as owners of firms and firms’ legislative connections. We hypothesized that the level of subsidiary ownership was less affected by the heterogeneity of foreign institutional environments for firms with a higher level of government ownership and for firms with legislative connections. These two interaction effects were tested using a sample of overseas subsidiaries documented in the 2010 annual reports of listed Chinese firms. The empirical findings provide robust support for the hypothesized effects. This study offers fresh insight on the role of government and political factors in firms’ internationalization activities.

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Acknowledgements

We thank the four editors of the special issue, the reviewers, and the participants to the special issue conference. We acknowledge the assistance from Drew Harden and Rongwei Chu.

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Authors and Affiliations

  1. Schulich School of Business, York University, Toronto, Canada

    Yigang Pan

  2. College of Business and Economics, University of Guelph, Guelph, Canada

    Lefa Teng

  3. Schulich School of Business, York University, Toronto, Canada

    Atipol Bhanich Supapol

  4. School of Management, Fudan University, Shanghai, China

    Xiongwen Lu

  5. Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China

    Dan Huang

  6. Schulich School of Business, York University, Toronto, Canada

    Zhennan Wang

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  1. Yigang Pan
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  2. Lefa Teng
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  4. Xiongwen Lu
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Correspondence to Lefa Teng.

Additional information

Accepted by Aldo Musacchio, Guest Editor, 13 April 2014. This article has been with the authors for four revisions.

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Pan, Y., Teng, L., Supapol, A. et al. Firms’ FDI ownership: The influence of government ownership and legislative connections. J Int Bus Stud 45, 1029–1043 (2014). https://doi.org/10.1057/jibs.2014.27

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  • DOI: https://doi.org/10.1057/jibs.2014.27

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