TY - JOUR
T1 - Gaining legitimacy or exploiting opportunities? MNCs’ response to the belt and road initiative in China
AU - Lv, Ping
AU - Arnoldi, Jakob
AU - Villadsen, Anders Ryom
PY - 2023/11
Y1 - 2023/11
N2 - Purpose: This study aims to investigate whether and why multinational corporations (MNCs) seek to reduce institutional costs of foreign direct investments (FDIs) by aligning with transnational political frameworks. Design/methodology/approach: This study uses the Chinese Belt and Road Initiative (BRI) to test whether MNCs’ subsidiaries in China increase FDI into BRI-affiliated countries after the BRI’s launch. This study compares FDIs by Chinese subsidiaries of foreign MNCs in the year before and two years after the BRI’s announcement. Hypotheses are tested for two explanations of why foreign MNCs seek to exploit the BRI. Findings: Investments into BRI-affiliated countries increased after the announcement of the BRI, and this increase is positively moderated by institutional distance between the MNC home country and the BRI-affiliated target country. This shows that the greater the institutional costs of investing in a BRI-affiliated country, the more responsive the MNCs’ Chinese subsidiary will be to the BRI. Research limitations/implications: This study demonstrates that MNCs respond to transnational political frameworks. This study only studies the immediate response because the BRI is an infrastructure project. Better infrastructure will, over time, lead to more investments; however, the immediate response is due not to infrastructure but political structure. Originality/value: The results show how MNCs use transnational political frameworks. The idea that MNCs can channel FDI through existing subsidiaries for this purpose has not previously been discussed in the literature.
AB - Purpose: This study aims to investigate whether and why multinational corporations (MNCs) seek to reduce institutional costs of foreign direct investments (FDIs) by aligning with transnational political frameworks. Design/methodology/approach: This study uses the Chinese Belt and Road Initiative (BRI) to test whether MNCs’ subsidiaries in China increase FDI into BRI-affiliated countries after the BRI’s launch. This study compares FDIs by Chinese subsidiaries of foreign MNCs in the year before and two years after the BRI’s announcement. Hypotheses are tested for two explanations of why foreign MNCs seek to exploit the BRI. Findings: Investments into BRI-affiliated countries increased after the announcement of the BRI, and this increase is positively moderated by institutional distance between the MNC home country and the BRI-affiliated target country. This shows that the greater the institutional costs of investing in a BRI-affiliated country, the more responsive the MNCs’ Chinese subsidiary will be to the BRI. Research limitations/implications: This study demonstrates that MNCs respond to transnational political frameworks. This study only studies the immediate response because the BRI is an infrastructure project. Better infrastructure will, over time, lead to more investments; however, the immediate response is due not to infrastructure but political structure. Originality/value: The results show how MNCs use transnational political frameworks. The idea that MNCs can channel FDI through existing subsidiaries for this purpose has not previously been discussed in the literature.
KW - Belt and road initiative (BRI)
KW - Foreign direct investment (FDI)
KW - Institutional cost
KW - Legitimacy
KW - Multinational corporations (MNCs)
UR - https://www.scopus.com/record/display.uri?eid=2-s2.0-85135252306&origin=inward&txGid=d7ddbc4be82a3afd7027a9f0b2ff241b&featureToggles=FEATURE_NEW_DOC_DETAILS_EXPORT:1,FEATURE_EXPORT_REDESIGN:0
U2 - 10.1108/CMS-12-2021-0523
DO - 10.1108/CMS-12-2021-0523
M3 - Journal article
SN - 1750-614X
VL - 17
SP - 954
EP - 969
JO - Chinese Management Studies
JF - Chinese Management Studies
IS - 5
ER -