Resources, Institutional Environments and Firm Scope: Evidence from an Emerging Economy

This dissertation investigates how institutional environments and firm resources influence firm scope. Building on strategy and international business literatures, I propose that institutional environments influence firm scope through the impacts on both the development of internal resources and the availability of external resources. In Chapter 2, I disaggregate the concept of institutional distance into different dimensions from an institutional perspective and empirically test the validity of the multi-dimensional approach in the sample of U.S. and Chinese firms by exploring the effects of distance on the foreign expansion strategies. The results also show that Chinese firms do have different strategic choices from U.S. firms when they invest abroad. In Chapter 3, I focus on government and international diversification in emerging economies. Compared with partially privatized enterprises (PPEs) and fully privatized enterprises (FPEs), state-owned enterprises (SOEs) are less likely to go abroad as a result of their risk-averse nature. In addition, different types of government corporations rely on different types of resources when they invest abroad: while SOEs reply on external resources such as debts, PPEs rely on internal resources such as intangible assets. An empirical investigation of the FDI activities of Chinese listed firms in high-tech industries between 1991 and 2007 supports the arguments. Finally, in Chapter 4, I focus on firm capability and related product diversification in emerging economies. I propose that seemingly related diversification, a type of diversification focusing on the relatedness of technologies but not of markets, will harm firm performance in emerging economies. Moreover, the lack of implementation capability also makes it difficult for firms to benefit from related diversification. I test these ideas on a population of Chinese firms listed on Hong Kong Stock Exchange from 1993 to 2006. Together, this dissertation shows the choice of firm scope in emerging economies is different from that in developed countries due to the uniqueness of resources and institutional environments. Theoretically, it integrates the resource-based view of firm, resource dependence theory and institutional theory to explain the role of resources and institutional environments in determining firm scope. Empirically, it provides large-sample quantitative evidence in an emerging economy.