Foreign Country-Specific Experience And Ownership Level: Moderating Effect Of Host Country’s Government Corruption

Abstract

According to internalization theory, corporate international expansion occurs as a series of incremental commitment processes, such as an increased level of ownership. In addition, it is well known that host country-specific experience facilitates the increased ownership level. However, the existing empirical studies show the mixed results about the relationship between host country-specific experience and ownership level: positive, negative, and non-significant. To elucidate these mixed results, this study carefully explores how host country’s government corruption moderates the relationship, given that institutional environments influence standard economic activities within a specific economy. This study found that host country-specific experience has a positive effect on the ownership level in their foreign subsidiaries but the positive relationship was moderated by the negative effect of host countries’ government corruption. Accordingly, this study carefully qualifies the direct relationship between country-specific experience and ownership strategy, suggesting that an institutional contingency perspective needs to be considered to understand corporate international expansion strategies by the increased ownership level.