1. ¹Department of Management, Chinese University of Hong Kong, Shatin, NT, Hong Kong
2. ²The Neeley School of Business, Texas Christian University, Fort Worth, USA

Correspondence: Daphne W Yiu, Department of Management, Chinese University of Hong Kong, Room 424, Leung Kau Kui Building, Shatin, NT, Hong Kong. Tel: +852 2609 7789; Fax: +852 2603 6840; E-mail: dyiu@cuhk.edu.hk

Received 19 June 2006; Revised 30 September 2006; Accepted 22 November 2006; Published online 10 May 2007.

Abstract

Past literature on foreign direct investment generally supports an economics perspective that there is a direct relationship between firm-specific ownership advantages and international expansion. However, in emerging economies, with their institutional environment context characterized by low resource munificence and continuous economic liberalization, a theoretical extension of the current perspective is needed. This paper introduces new parameters by focusing on specific ownership advantages and strategic actions that firms have to develop in response to the institutional characteristics of the emerging economies when they decide to pursue outward FDI. The focus here is on international venturing that requires a firm to engage in activities for new business creation in a foreign country rather than simply seek to distribute a product in another nation. It is shown empirically that the relationship between firm-specific ownership advantages and international venturing is moderated by the degree of home industry competition and export intensity. In addition, such a relationship is mediated by the intensity of corporate entrepreneurial transformation in the form of innovation, new business creation, and strategic renewal.