Abstract
Despite growing attention to the role of home countries in studies of emerging-market multinational enterprises (EMNEs), there is limited focus on how international expansion affects EMNEs’ home conditions. Drawing on signaling theory, we propose that EMNEs’ international expansions serve as a signaling mechanism that shapes perceptions of stakeholders in their home countries and thus facilitate their resource acquisition from these stakeholders. The signaling effect is strengthened when EMNEs enter more advanced host countries where higher entry barriers incur higher signaling costs that serve as isolating mechanisms; and when they are located in less developed home markets where information asymmetry is more serious due to weaker institutional arrangements. Furthermore, congruent signals, such as patents, strengthen the main effect by cross-confirming the signaled content, while incongruent signals, such as political connections, weaken it due to ambiguity in interpreting the original signal. Using instrumental variables and a difference-in-differences design to account for potential endogeneity of international expansion, our empirical analysis of Chinese-listed privately owned enterprises from 1999 to 2019 supports our propositions.
Résumé
Malgré l'attention croissante portée au rôle des pays d'origine dans les recherches sur les entreprises multinationales des marchés émergents (Emerging-Market Multinational Enterprises - EMNEs), les chercheurs se focalisent peu sur la manière dont l'expansion internationale influence les conditions des pays d’origine des EMNEs. Nous appuyant sur la théorie de la signalisation, nous proposons que les expansions internationales des EMNEs servent de mécanisme de signalisation qui façonne les perceptions des parties prenantes dans leurs pays d'origine, et facilitent ainsi l'acquisition de ressources auprès de ces dernières. L'impact de signalisation est renforcé lorsque les EMNEs entrent dans des pays d'accueil plus avancés où les barrières à l'entrée plus élevées entraînent des coûts de signalisation plus importants qui servent de mécanismes d'isolement ; et lorsqu'elles sont implantées sur des marchés d'origine moins développés où l'asymétrie d'information est plus sérieuse en raison des arrangements institutionnels plus faibles. De plus, les signaux congruents, tels que les brevets, renforcent l'effet principal par une confirmation croisée du contenu du signal, tandis que les signaux incongruents, tels que les relations politiques, l'affaiblissent en raison de l'ambiguïté de l'interprétation du signal original. En utilisant des variables instrumentales et un modèle de différences dans les différences pour tenir compte de l'endogénéité potentielle de l'expansion internationale, notre analyse empirique sur des entreprises privées chinoises cotées en bourse sur la période 1999 - 2019 confirme nos propositions.
Resumen
Pose de la creciente atención del país de origen en los estudios de empresas multinacionales de mercados emergentes (EMNEs por sus iniciales en inglés), hay un enfoque limitado a cómo la expansión internacional afecta las condiciones en el país de origen de las empresas multinacionales de mercados emergentes. Basándonos en la teoría de señalización, proponemos que la expansión internacional de las empresas multinacionales de mercados emergentes sirve como un mecanismo de señalización que moldea las percepciones de los grupos de interés en sus países de origen y con eso facilitan su adquisición de recursos con dichos grupos de interés. El efecto de señalamiento es fortalecido cuando las empresas multinacionales de mercados emergentes entran a países anfitriones más avanzados, en donde las barreras de entrada más altas suponen mayores costos de señalización que sirven como mecanismos de aislamiento, y cuando se ubican en mercados de origen menos desarrollados, en donde la asimetría de información es más seria debido a unos acuerdos institucionales más débiles. Adicionalmente, las señales congruentes, como las patentes, refuerzan el efecto principal mediante la confirmación cruzada del contenido señalado, mientras que las señales incongruentes, como las conexiones políticas, lo debilitan debido a la ambigüedad en la interpretación de la señal original. Utilizando variables instrumentales y un diseño de diferencias en diferencias para tener en cuenta la endogeneidad potencial de la expansión internacional, nuestro análisis empírico de las empresas chinas de propiedad privada que cotizan en bolsa desde 1999 hasta 2019 apoya nuestras proposiciones.
Resumo
Não obstante a crescente atenção ao papel dos países de origem em estudos de empresas multinacionais de mercados emergentes (EMNEs), há um foco limitado em como a expansão internacional afeta as condições domésticas de EMNEs. Com base na teoria da sinalização, propomos que expansões internacionais de EMNEs sirvam como um mecanismo de sinalização que molda percepções de stakeholders em seus países de origem e, assim, facilita a aquisição de recursos destes stakeholders. O efeito de sinalização é fortalecido quando EMNEs ingressam em países anfitriões mais avançados, onde barreiras de entrada mais altas incorrem em custos de sinalização mais altos que servem como mecanismos de isolamento; e quando estão localizados em mercados domésticos menos desenvolvidos, onde a assimetria de informação é mais elevada devido a arranjos institucionais mais fracos. Além disso, sinais congruentes, como patentes, fortalecem o efeito principal pela confirmação cruzada do conteúdo sinalizado, enquanto sinais incongruentes, como conexões políticas, o enfraquecem devido à ambiguidade na interpretação do sinal original. Usando variáveis instrumentais e um design de diferenças em diferenças para explicar uma possível endogeneidade da expansão internacional, nossa análise empírica de empresas privadas chinesas listadas de 1999 a 2019 corrobora nossas proposições.
摘要
尽管越来越多的学者重视母国在新兴市场跨国企业 (EMNEs) 研究中的作用, 但对国际扩张如何影响 EMNEs的母国处境仍关注有限。基于信号理论,我们提出 EMNEs 的国际扩张作为一种信号机制, 能够塑造其母国利益相关者的看法, 从而促进企业从这些利益相关者那里的资源获取。当 EMNEs 进入更发达的东道国时, 信号效应得到加强。 因为在这些国家, 更高的进入壁垒导致更高的作为隔离机制的信号成本。当EMNEs位于欠发达的母国市场时, 由于制度安排较弱, 信息不对称更为严重, 信号效应也得到加强。此外, 一致的信号(例如专利)通过交叉确认信号内容增强了主效应, 而不一致的信号(例如政治关系)由于带来对原始信号解释的含糊性则削弱了主效应。我们使用工具变量和双重差分设计来处理国际扩张潜在的内生性, 我们对 1999 至 2019 年间中国上市民营企业的实证分析支持了我们的命题。
Similar content being viewed by others
REFERENCES
Altman, E. I. 1980. Commercial bank lending: Process, credit scoring, and costs of errors in lending. Journal of Financial and Quantitative Analysis, 15(4): 813–832.
Balabanis, G., & Diamantopoulos, A. 2016. Consumer xenocentrism as determinant of foreign product preference: A system justification perspective. Journal of International Marketing, 24(3): 58–77.
Basdeo, D. K., Smith, K. G., Grimm, C. M., Rindova, V. P., & Derfus, P. J. 2006. The impact of market actions on firm reputation. Strategic Management Journal, 27(12): 1205–1219.
Buckley, P. J., & Casson, M. C. 1976. The future of the multinational enterprise. London: Macmillan.
Cassiman, B., & Golovko, E. 2011. Innovation and internationalization through exports. Journal of International Business Studies, 42(1): 56–75.
Chan, C. M., Makino, S., & Isobe, T. 2010. Does subnational region matter? Foreign affiliate performance in the United States and China. Strategic Management Journal, 31(11): 1226–1243.
Chen, S., & Chaiken, S. 1999. The heuristic-systematic model in its broader context. Dual-Process Theories in Social Psychology, 1: 73–96.
Chen, Y. 1999. Lost in revolution and reform: The socioeconomic pains of China’s red guards generation, 1966–1996. Journal of Contemporary China, 8(21): 219–239.
Connelly, B. L., Certo, S. T., Ireland, R. D., & Reutzel, C. R. 2011. Signaling theory: A review and assessment. Journal of Management, 37(1): 39–67.
Cuervo-Cazurra, A., & Genc, M. 2008. Transforming disadvantages into advantages: Developing-country MNEs in the least developed countries. Journal of International Business Studies, 39(6): 957–979.
Cuervo-Cazurra, A., Luo, Y., Ramamurti, R., & Ang, S. H. 2018. The impact of the home country on internationalization. Journal of World Business, 53(5): 593–604.
Cui, L., & Jiang, F. 2012. State ownership effect on firms’ FDI ownership decisions under institutional pressure: A study of Chinese outward-investing firms. Journal of International Business Studies, 43(3): 264–284.
Cui, L., & Xu, Y. 2019. Outward FDI and profitability of emerging economy firms: Diversifying from home resource dependence in early stage internationalization. Journal of World Business, 54(4): 372–386.
Cui, L., Meyer, K. E., & Hu, H. W. 2014. What drives firms’ intent to seek strategic assets by foreign direct investment? A study of emerging economy firms. Journal of World Business, 49(4): 488–501.
Drover, W., Wood, M. S., & Corbett, A. C. 2018. Toward a cognitive view of signalling theory: Individual attention and signal set interpretation. Journal of Management Studies, 55(2): 209–231.
Dreher, A., Fuchs, A., Parks, B., Strange, A., & Tierney, M. J. 2021. Aid, China, and growth: Evidence from a new global development finance dataset. American Economic Journal: Economic Policy, 13(2): 135–174.
Dunning, J. H. 1988. The eclectic paradigm of international production: A restatement and some possible extensions. Journal of International Business Studies, 19(1): 1–31.
Eden, L., & Miller, S. R. 2004. Distance matters: Liability of foreignness, institutional distance and ownership strategy. In M. A. Hitt, & J. L. Cheng (Eds.), Theories of the multinational enterprise: Diversity, complexity and relevance: 187–221. Emerald Group Publishing Limited.
Estrin, S., Meyer, K. E., & Pelletier, A. 2018. Emerging Economy MNEs: How does home country munificence matter? Journal of World Business, 53(4): 514–528.
Fisman, R., & Love, I. 2003. Trade credit, financial intermediary development, and industry growth. The Journal of Finance, 58(1): 353–374.
Ghemawat, P. 2001. Distance still matters. Harvard Business Review, 79(8): 137–147.
Gregory, N., Tenev, S., & Wagle, D. 2000. China’s emerging private enterprises: Prospects for the new century. Washington, DC: International Finance Corporation.
Gubbi, S. R., Aulakh, P. S., Ray, S., Sarkar, M. B., & Chittoor, R. 2010. Do international acquisitions by emerging-economy firms create shareholder value? The case of Indian firms. Journal of International Business Studies, 41(3): 397–418.
Haveman, H. A., Jia, N., Shi, J., & Wang, Y. 2017. The dynamics of political embeddedness in China. Administrative Science Quarterly, 62(1): 67–104.
Hernandez, E., & Guillén, M. F. 2018. What’s theoretically novel about emerging-market multinationals? Journal of International Business Studies, 49(1): 24–33.
Higgins, M., & Gulati, R. 2003. Getting off to a good start: The effects of upper echelon affiliations on underwriter prestige. Organization Science, 14(3): 244–263.
Hitt, M. A., Li, D., & Xu, K. 2016. International strategy: From local to global and beyond. Journal of World Business, 51(1): 58–73.
Hsu, D. H., & Ziedonis, R. H. 2013. Resources as dual sources of advantage: Implications for valuing entrepreneurial-firm patents. Strategic Management Journal, 34(7): 761–781.
Huang, K. G., & Li, J. 2019. Adopting knowledge from reverse innovations? Transnational patents and signaling from an emerging economy. Journal of International Business Studies, 50(7): 1078–1102.
Khanna, T., & Palepu, K. G. 2010. Winning in emerging markets: A road map for strategy and execution. Boston: Harvard Business Press.
Li, J., Meyer, K. E., Zhang, H., & Ding, Y. 2018. Diplomatic and corporate networks: Bridges to foreign locations. Journal of International Business Studies, 49(6): 659–683.
Li, Y., Zhang, Y. A., & Shi, W. 2020. Navigating geographic and cultural distances in international expansion: The paradoxical roles of firm size, age, and ownership. Strategic Management Journal, 41(5): 921–949.
Lu, J. W., & Beamish, P. W. 2004. International diversification and firm performance: The S-curve hypothesis. Academy of Management Journal, 47(4): 598–609.
Lu, J., Liu, X., Wright, M., & Filatotchev, I. 2014. International experience and FDI location choices of Chinese firms: The moderating effects of home country government support and host country institutions. Journal of International Business Studies, 45(4): 428–449.
Luo, Y., & Tung, R. L. 2007. International expansion of emerging market enterprises: A springboard perspective. Journal of International Business Studies, 38(4): 481–498.
Luo, Y., & Tung, R. L. 2018. A general theory of springboard MNEs. Journal of International Business Studies, 49(2): 129–152.
Luo, Y., & Wang, S. L. 2012. Foreign direct investment strategies by developing country multinationals: A diagnostic model for home country effects. Global Strategy Journal, 2(3): 244–261.
Luo, Y., & Witt, M. A. 2022. Springboard MNEs under de-globalization. Journal of International Business Studies, 53: 767–780.
Lyles, M., Li, D., & Yan, H. 2014. Chinese outward foreign direct investment performance: The role of learning. Management and Organization Review, 10(3): 411–437.
Marano, V., Tashman, P., & Kostova, T. 2017. Escaping the iron cage: Liabilities of origin and CSR reporting of emerging market multinational enterprises. Journal of International Business Studies, 48(3): 386–408.
Marquis, C., & Qiao, K. 2020. Waking from Mao’s dream: Communist ideological imprinting and the internationalization of entrepreneurial ventures in China. Administrative Science Quarterly, 65(3): 795–830.
Meyer, K. E. 2015. India and China's New Motives for Foreign Investment. Forbes Blog. http://www.forbes.com/sites/ceibs/2015/02/24/india-and-chinas-new-motives-for-foreign-investment/. Accessed March, 2022.
Meyer, K. E., Ding, Y., Li, J., & Zhang, H. 2014. Overcoming distrust: How state-owned enterprises adapt their foreign entries to institutional pressures abroad. Journal of International Business Studies, 45(8): 1005–1028.
Meyer, K. E., Estrin, S., Bhaumik, S. K., & Peng, M. W. 2009. Institutions, resources, and entry strategies in emerging economies. Strategic Management Journal, 30(1): 61–80.
Meyer, K. E., Van Witteloostuijn, A., & Beugelsdijk, S. 2017. What’s in a p? Reassessing best practices for conducting and reporting hypothesis-testing research. Journal of International Business Studies, 48(5): 535–551.
Paruchuri, S., Han, J. H., & Prakash, P. 2021. Salient expectations? Incongruence across capability and integrity signals and investor reactions to organizational misconduct. Academy of Management Journal, 64(2): 562–586.
Petersen, M. A., & Rajan, R. G. 1997. Trade credit: Theories and evidence. The Review of Financial Studies, 10(3): 661–691.
Ramamurti, R. 2012. What is really different about emerging market multinationals? Global Strategy Journal, 2(1): 41–47.
Rao, H., & Greve, H. R. 2018. Disasters and community resilience: Spanish flu and the formation of retail cooperatives in Norway. Academy of Management Journal, 61(1): 5–25.
Rugman, A. M., & Verbeke, A. 1992. A note on the transnational solution and the transaction cost theory of multinational strategic management. Journal of International Business Studies, 23(4): 761–771.
Shi, W., Sun, S. L., Yan, D., & Zhu, Z. 2017. Institutional fragility and outward foreign direct investment from China. Journal of International Business Studies, 48(4): 452–476.
Spence, M. 1973. Job market signaling. Quarterly Journal of Economics, 87: 355–374.
Stock, J. H., & Yogo, M. 2002. Testing for Weak Instruments in Linear IV Regression. NBER Technical Working Paper, No. 284.
UNCTAD 2019. World Investment Report 2019: Special Economic Zones. New York: United Nations Publications.
Verbeke, A., & Kano, L. 2015. The new internalization theory and multinational enterprises from emerging economies: A business history perspective. Business History Review, 89(3): 415–445.
Vermeulen, F., & Barkema, H. 2002. Pace, rhythm, and scope: Process dependence in building a profitable multinational corporation. Strategic Management Journal, 23(7): 637–653.
Wan, W. P., & Hoskisson, R. E. 2003. Home country environments, corporate diversification strategies, and firm performance. Academy of Management Journal, 46(1): 27–45.
Wang, D., Du, F., & Marquis, C. 2019. Defending Mao’s dream: How politicians’ ideological imprinting affects firms’ political appointment in China. Academy of Management Journal, 62(4): 1111–1136.
Wang, S. L., Luo, Y., Lu, X., Sun, J., & Maksimov, V. 2014. Autonomy delegation to foreign subsidiaries: An enabling mechanism for emerging-market multinationals. Journal of International Business Studies, 45(2): 111–130.
Weick, K. E. 1995. Sensemaking in organizations. Thousand Oaks, CA: Sage Publications.
Williamson, P. J., & Raman, A. P. 2011. How China reset its global acquisition agenda. Harvard Business Review, 89(4): 109–114.
Wilson, F. 2016. Making loan decisions in banks: Straight from the gut? Journal of Business Ethics, 137(1): 53–63.
Witt, M. A., & Lewin, A. Y. 2007. Outward foreign direct investment as escape response to home country institutional constraints. Journal of International Business Studies, 38(4): 579–594.
Wooldridge, J. M. 2015. Control function methods in applied econometrics. Journal of Human Resources, 50(2): 420–445.
Xia, J., Ma, X., Lu, J. W., & Yiu, D. W. 2014. Outward foreign direct investment by emerging market firms: A resource dependence logic. Strategic Management Journal, 35(9): 1343–1363.
Yamakawa, Y., Khavul, S., Peng, M. W., & Deeds, D. L. 2013. Venturing from emerging economies. Strategic Entrepreneurship Journal, 7(3): 181–196.
Yeung, G. 2009. How banks in China make lending decisions. Journal of Contemporary China, 18(59): 285–302.
Zaheer, S. 1995. Overcoming the liability of foreignness. Academy of Management Journal, 38(2): 341–363.
Zhang, J., Marquis, C., & Qiao, K. 2016. Do political connections buffer firms from or bind firms to the government? A study of corporate charitable donations of Chinese firms. Organization Science, 27(5): 1307–1324.
Zhao, H., & Lu, J. 2016. Contingent value of political capital in bank loan acquisition: Evidence from founder-controlled private enterprises in China. Journal of Business Venturing, 31(2): 153–174.
Zollo, M., & Winter, S. G. 2002. Deliberate learning and the evolution of dynamic capabilities. Organization Science, 13(3): 339–351.
ACKNOWLEDGEMENTS
We thank editor Professor Klaus Meyer, Professor Rosalie Tung, Professor Sjoerd Beugelsdijk, and three anonymous reviewers for their insightful feedback. We also appreciate helpful comments on earlier versions of this paper from Dan Li, Stephanie Wang, and Cathy Liu. The first author is grateful for funding support from the National Natural Science Foundation of China (Grant No. 72002215) and the second author appreciates support provided by the Samuel and Pauline Glaubinger Professorship.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Accepted by Klaus Meyer, Area Editor, 5 March 2023. This article has been with the authors for four revisions.
Supplementary Information
Below is the link to the electronic supplementary material.
Rights and permissions
Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.
About this article
Cite this article
Du, J., Zhao, E.Y. International expansion and home-country resource acquisition: A signaling perspective of emerging-market firms’ internationalization. J Int Bus Stud 54, 1642–1660 (2023). https://doi.org/10.1057/s41267-023-00624-z
Received:
Revised:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1057/s41267-023-00624-z