AIB 2012 Conference Proceedings - Academy of International ...

TUESDAY
Legal System Uncertainty and FDI Attraction in Southeast Asia
George O. White III, Old Dominion University
Anne Canabal, University of Maine
Amon Chizema, Loughborough University
Mark J. Perry, University of Michigan-Flint
Conventional wisdom suggests that legal system uncertainty will negatively affect foreign direct investment
(FDI) attraction. However, to date, research on the effects of legal system uncertainty on FDI attraction in
emerging markets has received very little attention. In this paper, we hypothesize that (1) the relationship
between legal system uncertainty and FDI attraction is curvilinear in nature, such that FDI attraction decreases
with legal system uncertainty down to an inflection point, but then increases beyond this point, and (2) that the
relationship between legal system uncertainty and FDI attraction is moderated by government intervention in
the host country economy, such that the strength of this relationship is greater when government intervention
is high rather than when it is low. Moreover, we suggest that these relationships exist because uncertainty will
provide opportunities for FDI that seek this form of operating environment, leveraging legal system uncertainty
as a basis for competitive advantage. We test and find support for our hypotheses using FDI data from nine
Southeast Asian countries for the years 1995 to 2005. Implications of our findings and suggestions for future
inquiry are presented. (For more information, please contact: George O. White III, Old Dominion University,
USA: gowhite@odu.edu)
Internationalization Decisions and Political Hazards: Managerial Intent in a Risky Location
Elizabeth Maitland, University of New South Wales
Andre Sammartino, University of Melbourne
How decision-makers incorporate assessments of political risk into internationalization decisions is a ‘black box'
in international business (IB). Research on the interplay between states and multinational enterprises (MNEs)
almost exclusively utilizes data aggregated at the national, industry and firm levels. Yet, assessment of risks and
locations is a task undertaken, at least initially, by individuals. We introduce and explore the cognitive aspects of
such decisions. Utilizing extensive evidence from a mining MNE's expansion into West Africa, we demonstrate
the crucial role of individuals' decision heuristics and schemas, and argue for greater consideration of such
elements in IB research. (For more information, please contact: Andre Sammartino, University of Melbourne,
Australia: samma@unimelb.edu.au)
Legal Legitimacy, Political Stability and MNE Entry into Developing Countries: The Role of BIT Design
Christopher Williams, University of Western Ontario
Candace A. Martinez, Saint Louis University
Tatiana Vashchilko, University of Western Ontario
We investigate the impact of bilateral investment treaty (BIT) design on the likelihood of choosing majoritycontrolled
entry modes as political stability changes across host countries. We extend institutional and
transaction choice theories by focusing on the joint impact of domestic and international political institutions as
well as on the variations in their design. We argue that the stringency of BIT design, rather than the mere
presence of BITs, has a significant effect on entry mode choices. However, this effect is conditional on the
degree of political stability in host countries. The sample includes 201 foreign expansions made by AEX-listed
Dutch MNEs between 2004 and 2008 into 30 developing countries with which The Netherlands had ratified
BITs. As hypothesized, we find that both political stability and BIT stringency have a positive impact on seeking
majority control in the investment and that BIT stringency has a stronger impact on majority control decisions in
less politically stable countries. We conclude with research and management implications. (For more
information, please contact: Christopher Williams, University of Western Ontario, Canada:
cwilliams@ivey.uwo.ca)
AIB 2012 Conference Proceedings
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