Institutional Explanations of Cross-Border Alliance Modes: The Case of Emerging Economies Firms

Zusammenfassung

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Using a sample of 628 cross-border alliances established by emerging economies firms across 25 manufacturing and service industries in 64 host countries in the period 1995-2004, this paper investigates the effect of institutional factors on the adoption of equity alliance mode. The findings of this study contribute to empirical research in institutional theory, institutional explanations of cross-border alliances and strategic behavior of emerging economies firms. The authors find support for institutional explanations of the adoption of equity alliance mode by emerging economies firms. They also find that institutional effects are contingent on the alliance location. When emerging economies firms establish alliances in developed host countries, their governance choice is most influenced by the normative pillar, followed by the cognitive pillar, with the regulatory pillar having a negligible effect. When the host countries are emerging economies, the regulatory pillar has the strongest influence followed by the cognitive pillar, with the normative pillar having an insignificant effect.

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Auszug

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Institutional Explanations of Cross-Border Alliance Modes: The Case of Emerging Economies Firms

Introduction

Having been largely a net recipient of foreign direct investment for a number of decades, emerging economies (EE) firms are increasingly expanding abroad. Outward foreign direct investment by EE firms has risen from a modest amount in the early 1980s to US$ 174 billion in 2006 (UNCTAD n.d.). EE firms are motivated to internationalize in order to alleviate domestic institutional constraints, overcome latecomer disadvantages, counter-attack global rivals' major foothold in the home country market, and exploit own competitive advantages in host countries (Luo/Tung 2007). They are also moving abroad as a result of the internationalization knowledge they have accumulated from foreign firms in their home countries in the past.

EE firms' international expansions take place through various modes, notably alliances, mergers and acquisitions, and greenfield ventures (Hitt/Franklin/Zhu 2006). Few empirical researches have looked into die use of alliances vis-à-vis acquisitions in the context of EE firms. Initial evidence suggests that acquisition represents a more dominant mode than alliances (Ang/Michailova 2007). However, alliances have their merits. Alliances allow these firms to share risks and costs and also to reduce institutional uncertainties by partnering with local firms. Alliances are an efficient mechanism for building on established reputation and legitimacy offered by partners. However, little work has been done on alliances established by EE firms, with the few exceptions focusing mainly on alliance partner selection (Hitt et al. 2000, Hitt et al. 2004). To our knowledge, no study has addressed the issue of EE firms' cross-border alliance modes.

Institutional theory is particularly relevant for explaining firm behavior as markets emerge (Hoskisson et al. 2000). Recent studies have utilized institutional theory to examine, among others, the role of business group affiliation on the survival of foreign subsidiaries of EE firms (Garg/Delios 2007), how institutional changes influence firms' internationalization paths (Chittoor/Ray 2007) and the relationships between institutional environments and foreign subsidiary ownership structure (Chan/Makino 2007). At the same time, empirical studies that have utilized institutional tiieory have not examined simultaneously the regulatory, normative, and cognitive institutional pillars, Levitt and Nass (1989) and Palmer, Jennings, and Zhou (1993) being exceptions. This can result in potential bias as these pillars are interconnected (Mizruchi/Fein 1999). To avoid this, our study simultaneously examines the effects of all three institutional pillars.

The application of institutional tiieory to explain alliance governance mode is imperative. Cross-border alliances are an efficient mechanism to build legitimacy through partnering with established firms. The three institutional pillars provide bases for legiti...

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