Shifting the Rules of the Game : Institutional Change as a Barrier to MNE Investment Activity

Abstract

This thesis argues that the country-specific instabilities of institutional change are of high relevance for multinational enterprises (MNEs) which operate in multiple national institutional environments. The International Business literature has long emphasized that underdeveloped institutional environments, mostly in developing and emerging economies, present significant barriers to the investment activity of MNEs in the form of foreign direct investment (FDI). While the link between FDI, uncertainty and institutional underdevelopment, e.g., in the form of deficient property rights, has been discussed in detail, the role of the dynamics of institutional environments has received little attention. However, the long-term nature of FDI is likely to require not only institutions that are developed, but also stable. The first part of the thesis develops a conceptual framework that engages with the potentially negative effects of disruptive institutional change processes on locational FDI attractiveness. This is followed by three independent essays that highlight the frameworka s different implications. The first essay discusses theoretical implications, while the second and third essay provide some supporting evidence for the central thesis. The conclusion provides some thoughts on how the developed arguments can support future research.