Foreign Investment Strategies and Sub-national ... - E-Journal

Last but not least, every single country study raises the issue of generalization. Case research (Peng
2000b, Luo 2001a) and interviews that we conducted with expatriate managers in China point to the policies
and attitudes of the local government as an important factor influencing FDI decisions. Hence we believe
that this issue is highly relevant in China, as well as other countries where both central and local authorities
crucially influence institutions of concern to foreign investors, such as India (Oman 2000) and Russia
(Meyer and Pind 1999). Hence, we propose to test the propositions presented in this paper in other contexts.
7. Conclusion
The institutional perspective is a new line of theorizing in strategic management research (Oliver 1997) that
holds particular potential for explaining strategies in emerging economies (Hoskisson et al. 2000, Meyer
2001, Peng 2003). Many theoretical and empirical studies suggest that institutions crucially influence FDI.
However, this research has focused primarily on formal rather then informal institutions, and on national
rather then sub-national institutions. In this study we have advanced the institutional theory of strategy by
shedding more light on how institutions affect foreign investors’ entry strategy. We propose a theoretical
framework highlighting interaction between organizations and institutions at a sub-national level, and their
impact on FDI. On this basis, we have presented empirical tests on some aspects of the framework, subject to
data constraints.
The institutional perspective suggests that one cannot understand business strategies if one does not
understand the context. This basic insights becomes particular pertinent when the context varies from the
context that the researcher and/or the reader are used to. We thus reserved some space in our paper for the
discussion of the context and refer to qualitative work that illustrates the working of some the institutions
affecting business in Vietnam (Tenev et al. 2003, Meyer and Nguyen 2004). Future research on emerging
economies may greatly benefit from a more fine-grained understanding of how institutions affect corporate
strategies.
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