Institutional investors and international investments in emerging economy firms: A behavioral risk perspective |
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| Institution: | 1. School of Business and Economics, Loughborough University, Loughborough, United Kingdom;2. Strategic Management Area, Indian Institute of Management, Kozhikode, Kerala, India;1. Università Luiss Guido Carli, Department of Business and Management, viale Romania 32, 00197 Rome, Italy;2. Institute for International Business, WU Vienna University of Economics and Business, Welthandelsplatz 1, 1020 Vienna, Austria;3. LMU Munich, Ludwigstr. 28, 80539 Munich, Germany;4. Institute for International Business, WU Vienna University of Economics and Business, Welthandelsplatz 1, 1020 Vienna, Austria;5. Department of Strategy and Innovation, Copenhagen Business School, Frederiksberg, Denmark;1. Department of Management, Economics and Quantitative Methods, Bergamo University, Via Dei Caniana, 2, 24127 Bergamo, Italy;2. Department of Business Administration, Finance, Management and Law, University of Milano-Bicocca, Via Bicocca degli Arcimboldi, 8, 20126 Milan, Italy;3. Department of International Business, Ulster University Business School, Ulster University, Magee Campus, Derry Londonderry BT48 7JL, Northern Ireland, United Kingdom;1. Universidad Adolfo Ibáñez, Av. Diagonal Las Torres 2700 Of. 511 Peñalolén, Santiago, RM 7941169, Chile;2. University of South Carolina, 1705 College Street, Columbia, SC 29208, United States;3. University of St. Gallen, Dufourstrasse 40a 9000, St. Gallen, Switzerland;1. School of Economics and Management, Tongji University, Shanghai City, 200092, China;2. School of Economics and Management, Southwest Jiaotong University, Chengdu, Sichuan Province, 610031, China;3. Department of Management, College of Business and Economics, Lehigh University, United States;4. Department of International Business, College of Business, San Francisco State University, United States |
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| Abstract: | While the extant literature has examined the influence of controlling and non-controlling principals on the internationalization decisions of emerging market firms, heterogeneity among non-controlling principals is largely ignored. The risk characteristics of different groups of owners, shaped by their institutional environments, could contribute to the differences in their preferences for firm internationalization. In this paper, we draw insights from institutional theory and behavioral risk perspective to examine the risk propensities and risk perceptions of various non-controlling principals, such as pressure-resistant (FIIs and mutual funds) and pressure-sensitive (banks, insurance companies and lending institutions) institutional investors. Empirical results from a sample of 2364 unique Indian firms during the 2005–2014 time-period show that, after controlling for firm-level resources and capabilities identified in prior literature, the ownership share of different types of institutional investors is associated with firms’ international investments differently. While pressure-sensitive institutional investors, such as banks and insurance companies, are not supportive of foreign investments by firms, pressure-resistant institutional investors, such as FIIs and mutual funds, are supportive of this strategic decision. Furthermore, our results show that the family ownership in a firm (measured in terms of family shareholding) further lowers the preference of pressure sensitive institutional investors for internationalization, whereas family ownership positively moderates the pressure resistant investors towards internationalization. |
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| Keywords: | Internationalization Ownership structure Family ownership Institutional investors Emerging markets Behavioral risk |
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