The Role of International Institutional Complexity on Emerging Market Multinational Companies' Innovation

This study examines the role of international institutional complexity, which is defined as the scope and multiplicity of institutional dimensions across foreign markets, on emerging market multinational companies (EMMCs)' innovation performance. We propose that the international institutional complexity provides learning opportunities for EMMCs' innovation performance but also incurs higher management costs to handle information overload from overextended internationalization. We further propose that the host exposure and the heterogeneity of an EMMC's top management team (TMT) moderate the main effect of international institutional complexity on EMMC innovation. The empirical testing utilizes a longitudinal panel data of 7,072 foreign expansion steps by 767 Chinese firms between 2001 and 2010, offering strong support for the proposed hypotheses.