Department of Management

Domestic Acquisitions, Institutional Heterogeneity and the Internationalization of Chinese Firms

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Liability of foreignness increases firm risk of doing business abroad. However, it appears not to deter Chinese firms as evidenced by their risky internationalization pattern. This study is concerned with explaining this phenomenon. Drawing on organizational learning and institutional theories, I argue that institutional heterogeneity in China offers firms an opportunity to develop routines to overcome the liability of foreignness through gaining acquisition experience outside of their home province. Further, I propose that coastal and inland firms develop different routines from coastal and inland acquisition experience. I test these arguments on a panel dataset of listed Chinese firms, tracing their acquisition behavior from 2006 to 2015. My analyses suggest that acquisition experience outside of the home province matters and that, in the case of inland firms, coastal acquisition experience is particularly beneficial for future internationalization. The present study contributes to the literature on the internationalization of Chinese firms. It highlights the value of context-specific measures for Chinese management research, sheds light on the functionality of institutional heterogeneity in China, and provides evidence to re-evaluate the degree of risk of Chinese firms cross-border growth.

Original languageEnglish
JournalAcademy of Management Proceedings
Publication statusPublished - 2018

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