Does ownership structure of emerging-market firms affect their outward FDI? The case of the Indian automotive and pharmaceutical sectors
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This paper examines the impact of ownership structures of emerging-market firms, which are shaped by local institutions, on the decision of these firms to undertake outward FDI. Our results suggest that family firms and firms with concentrated ownerships (both ubiquitous in emerging markets) are less likely to invest overseas, and that strategic equity holding by foreign investors facilitates outward FDI. We conclude that organisational forms such as family firms, which are optimal outcomes of institutions prevailing in emerging markets, may be suboptimal in a changing business environment in which outward FDI is necessary for access to resources and markets.
Keywordsinstitutions ownership/control structures family firms foreign investors outward FDI emerging-market MNEs
The authors acknowledge support from the ESRC under award RES-062-23-0986. They would like to thank Stijn Classens and Jayesh Kumar for the use of the ownership data, Nina Blossinger and Yama Temouri for excellent research assistance, and session participants at the 2008 AIB (UK) conference, four anonymous referees, special issue editor Mike Peng and editor-in-chief Lorraine Eden for helpful comments. The authors remain responsible for all remaining errors.
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