How do emerging multinationals configure political connections across institutional contexts?

Abstract

© 2017 Strategic Management Society. Research Summary: Forming informal ties with political agents is viewed as a viable strategy for multinational enterprises seeking to enter emerging countries. Less is known about the conditions under which political connection is most helpful for firms dealing with cross-border institutional distance. We discuss the distinctive mechanisms through which emerging multinationals may benefit from both home and host political connections. Based on the strategy tripod perspective, we postulate that the importance of different types of connections depends on the overall configurations of a firm's resources and industry characteristics, and these may change with institutional distance. Our analysis of a sample of Chinese high-tech manufacturing firms yields new insights into political connections, institutional distance, and the strategy tripod perspective. Managerial Summary: Political connections play an important role in firms' international expansion. In this study, we consider the importance of home political connections and host political connections in overcoming institutional barriers to foreign entry. We show that this importance varies, depending on firms' resource bases and industry dynamics, and it may switch from a useful asset to a dispensable one under certain circumstances. We reach our conclusion from an analysis of Chinese high-tech manufacturing firms' foreign direct investment.