Firm non‐market capabilities and the effect of supranational institutional safeguards on the location choice of international investments
Journal
Strategic Management Journal
Type
journal article
Date Issued
2018-08-20
Author(s)
Abstract
We investigate the extent to which firms rely on supranational institutional safeguards versus their non‐market capabilities to offset the risks of investing abroad. We argue that firms with non‐market capabilities are insensitive to supranational institutional safeguards when choosing the location of their international investments. We show that supranational agreements between an investor's home and host nation, operationalized as bilateral investment treaties (BITs), increase the likelihood of investment, but there is substantial firm heterogeneity with respect to this relationship. Firms with various forms of non‐market capabilities are not sensitive to BITs, whereas other firms are more likely to invest under BITs. We advance the understanding of how firm non‐market capabilities can substitute for supranational institutional arrangements in addressing risks associated with host country institutional weaknesses.
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Wiley
Volume
39
Number
10
Subject(s)
Division(s)