Home country institutional ties and Chinese SMEs' OFDI: Institutional polycentrism and resource dependence perspectives

Research Summary: Combining institutional poly- centrism and resource dependence perspectives, we theorize that small-and-medium-sized enterprises' (SMEs) outward foreign direct investment (OFDI) depends on the types and levels of home institutional ties, and this relationship is moderated by technological resources. Analyzing a sample of 1123 Chinese listed SMEs from 2009 to 2019, we find that (1) SMEs with local political and industry association ties conduct fewer OFDI than those without such ties, (2) SMEs with central political ties conduct more OFDI than those without such ties, (3) SMEs' technological resources condition some of these relationships. We contribute to global strategy research by highlighting how different types and levels of institutional ties create dependencies that shape SMEs' OFDI, and how firms' technological resources moderate these effects.
Managerial Summary: This study offers practical guidance for SME managers operating in relationship-based environments. Our findings show that the value of home institutional ties varies by type and level, shap- ing how firms design their OFDI strategies. First, man- agers should carefully assess the various resources available via ties to different institutional centers and the expectations attached to those ties. For instance, local institutional ties provide various domestic resources valuable in the home market and involve pressures to contribute locally, while central political ties facilitate OFDI by offering resources that can be leveraged abroad and aligning firms' strategies with global agendas. Second, such strategic decisions depend on a balance between internal and external resources available to firms. Managers should flexibly balance ties and technological resources when developing OFDI strategies.