Added Institutional Distance And Internationalization Speed Of Chinese Firms:the Moderating Effects Of Government Involvement And Degree Of Internationalization

This thesis focuses on a newly developed concept, added institutional distance in the literature of institutional theory in explaining Chinese Multinational Enterprise (CMNE)’s internationalization speed which is of great importance in allocating coporate resources and building dynamic capabilities. Added institutional distance, in terms of three sub-dimensions:regulative, normative and cognitive, for a new international expansion is defined as the minimum institutional distance, in terms of these three sub-dimensions, between the new entering country and all existing countries in MNE’s portfolio (Hutzschenreuter & Voll,2008; Hutzschenreuter et al., 2011). A framework is constructed to analyze the main effect of institutional factors in each sub-dimension on internationalization speed and the moderating effect of government involvement and degree of internationalization on the relationship between prior added institutional distance in each sub-dimension and the future internationalization speed.Kostova (1996) defined the institutional environment in terms of Scott’s (1995) three pillars-the regulative, normative, and cognitive domains of the environment, and developed a key concept, institutional distance, for difference between the host and home countries of the MNE in terms of the above three sub-dimensions(Xu,2001). The regulative dimension derived here is based on regulatory quality in World Governance Indicator (World Bank,2015). The normative dimension derived here is based on "management" factor in 2005-2015 Global Competitiveness Index Historical Dataset (World Economic Forum,2015). Sub-items under the factor are selected to form normative scales. The cognitive dimension derived here is based on the Hofstede database. Regulative distance is calculated as the absolute value of score of regulatory quality between two countries, while normative distance and cognitive distance are measured in a similar way to Kogut & Singh’s (1988) approach to derive cultural distance.Hypotheses are tested by Stata13.0 with a large sample database (131 MNEs listed on the main board of China Stock Exchange and their 730 subsidiaries located in 71 countries during the period from 2007 to 2014) from Bureau van Dijk Electronic Publishing (BvD). Statistical results demonstrate that internationalization speed in the subsequent period is negatively affected by the added institutional distance in terms of three sub-dimensions associated with the MNE’s international expansion in one time period. The moderating effect of degree of internationalization on these three relationships is significantly negative; however the moderating effect of government involvement is only significantly positive on the relationship between prior added normative distance and the future internationalization speed. Government involvement positively moderates the relationship between prior added regulative or cognitive distance and future internationalization speed, but insignificantly.