Electronic Thesis and Dissertation Repository

Degree

Doctor of Philosophy

Program

Business

Supervisor

Dr. Paul W. Beamish

Abstract

This dissertation is guided by three research questions. First, how does host market corruption impact the equity-based market entry strategies implemented by multinational enterprises (MNEs) with respect to their foreign subsidiary investments? Second, does host market corruption increase the likelihood of market exit? Third, can MNEs implement strategies which reduce the likelihood of market exit under conditions of more pervasive host market corruption?

In the first essay, I synthesize insights from institutional theory and integrative social contracts theory to dis-aggregate the concept of government corruption into two dimensions (grand and petty). My theory pertaining to informal institutional pluralism suggests that discrete institutions (such as government corruption) within a host market can be conceptualized as pluralistic phenomena constituted by distinct dimensions which exert a disparate impact on the foreign entry strategy of MNEs.

In the second essay, I build on the concept of informal institutional pluralism, categorizing corruption into two dimensions (public and private) to study its impact on the structure of equity-based foreign subsidiary investments. My theory proposes that the primary mechanism that drives the distinct approaches to foreign entry is the firm’s anticipated reliance on different sources of bargaining power to reduce information asymmetries that it expects to encounter in the host market.

In the third essay, I study the relationship between host market corruption pervasiveness, the subsidiary localization strategies implemented by MNEs and the likelihood of host market exit. In this context, the strategic insights proffered by resource dependence theory (RDT) and institutional theory (IT) are characterized by distinct spatial orientations. While RDT predicts that subsidiaries will implement proximal (or, host market-oriented) localization strategies, IT suggests that distal (or, home market-oriented) localization strategies are better-suited to reducing the likelihood of exit from increasingly corrupt host market environments. I find that a proximally-oriented partnering strategy heightens the likelihood of market exit under conditions of more pervasive host market public corruption, but not more pervasive private corruption. Conversely, a distally-oriented expatriate strategy increases the likelihood of market exit under conditions of both more pervasive public corruption and private corruption.

Taken as a whole, this dissertation introduces new theory, constructs and insights into the relationship between host market corruption and the equity-based foreign entry strategies of MNEs.

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