Relational ownership, institutional context, and internationalization of state‐owned enterprises: When and how are multinational co‐owners a plus?

Research Summary We investigate when and how a foreign multinational enterprise by acting as a relational co‐owner helps the internationalization of hybrid state‐owned enterprises. We merge the “liability of stateness” and the “government as strategist” perspectives with an institutional context‐based approach. We claim that the effect of multinational enterprise relational co‐ownership is contingent on the countries' institutional settings. It is positive at lower levels of both institutional coordination (as a measure of variety of capitalism) and government effectiveness. This effect is mitigated as coordination and government effectiveness increase. Further, a comparison between hybrid state‐owned and private‐owned enterprises shows that the magnitude of the contribution by foreign relational co‐owners to internationalization is also moderated by institutional variables. Managerial Summary Opportunities and challenges for state‐owned enterprises (SOEs) to expand their activities abroad and to climb the rankings of the world‐class multinational corporations have been emerging. However, these enterprises often lack the experience required for internationalization and suffer from the inward‐looking orientation and political interferences of their national governments. This is especially true when governments are ineffective in getting things done, and the local institutions limit their role to sustaining a positive regulatory internal market, but with no strategy to promote multinational state‐owned players. Under these conditions, the co‐ownership with a foreign proactive industrial partner can be an effective strategy for SOEs to overcome the difficulties in entering foreign markets.