What drives outward FDI from emerging economies? The interplay between exploration orientation and home-country institutional changes

Abstract

We examine how home-country government involvement and institutional environments interact with the exploration orientation of emerging market firms (EMFs) and how these interrelationships affect the outward foreign direct investment (FDI) behaviours of EMFs. By using a unique data set of Chinese firms, we find that exploration orientation has a positive effect on the outward FDI propensity and outward FDI intensity of Chinese firms. The findings further demonstrate that government support can enhance the independent effects of exploration orientation on outward FDI propensity and outward FDI intensity, but such effects will weaken when a high degree of state ownership exists within these firms. No evidence is found that regional institutional development moderates the effect of exploration orientation on outward FDI behaviours. Copyright (c) 2017 ASAC. Published by John Wiley Sons, Ltd.