Does ownership structure of emerging market firms affect their outward FDI? The case of indian automotive and pharmaceutical sectors

Abstract

This article examines the impact of ownership structures of emerging market firms, which are shaped by local institutions, on the decision of these firms to undertake outward FDI. Our results suggest that family firms and firms with concentrated ownerships, both ubiquitous in emerging markets, are less likely to invest overseas, and that strategic equity holding by foreign investors facilitates outward FDI. We conclude that organisational forms such as family firms, that are optimal outcomes of institutions prevailing in emerging markets, may be sub-optimal in a changing business environment in which outward FDI is necessary for access to resources and markets.