Institutions, Policy Risk, and Firms Behavior. Foreign Investments in High-Risk Countries.

Abstract

This dissertation investigates the relationship between host country institution-related (policy) risks and firms' international investment strategies. The dissertation consists of four essays. Essay 1 contributes to a fundamental discussion in the strategy and international business literature concerning why many firms continue to invest in countries with greater policy uncertainties by providing a more nuanced analysis of the strategies that MNEs use to handle and curb host country policy risks when investing abroad. Essay 2 outlines how host countries' domestic and transnational institutional arrangements help firms dampen host country policy risks against their assets. Essay 3 examines how the alignment of interests between firms’ home and host countries affects the costs of doing business abroad and subsidiary-level investments. Finally, Essay 4 demonstrates how firms contribute to institutionalization by examining investments by impact investing firms in high-risk developing countries. The essays provided in this dissertation incorporate several mechanisms to explain how firms respond to the institutional practices that affect them, thereby contributing to an important—but scarcely examined—aspect of institutionalization in the strategy and international business research.