New Motivation for Emerging Economies Firms Internationalization : The Zonal Advantage

What motivates firms in emerging economies to internationalize? In contrast to the previous literature suggesting that a competitive advantage is the key for firms to enter foreign markets, we propose one new explanation: the zonal advantage (ZA). We illustrate how zonal advantage affects firms' internationalization based on the resource-based view and a simple mathematical model. The proof shows that the competitive advantage is a special case of zonal advantages, bridging the traditional internationalization theory with zonal advantage theory. Using a sample of Chinese listed firms to empirically test the hypothesis, we find that for every 10% increase in ZA, firms increase internationalization by 2.4%. Furthermore, we use the implementation of the Belt and Road Initiative in 2013 as an exogenous shock and show that the internationalization degree of enterprises affected by exogenous shocks is significantly improved. The Belt and Road Initiative has significantly increased the internationalization of companies with low gross margins in the domestic market, but the impact on companies with high gross margins in the domestic market is insignificant. Our findings provide novel evidence for the zonal advantage explanation of corporate internationalization and have significant practical implications