Ownership Strategy of Multinational Enterprises and the Impacts of Regulative and Normative Institutional Distance: Evidence from Finnish Foreign Direct Investments in Central and Eastern Europe

This study is one of the first to address the ownership strategy of multinational enterprises from the Nordic region using the concepts of regulative and normative institutional distance. This study contributes to the application of the institutional distance concept in foreign market entry studies. The results of our study challenge some of the findings of the previous studies due to unique sample and settings of the study. Based on a sample of 345 foreign direct investments (FDIs) made by 122 Finnish firms in 11 Central and Eastern European countries during 1990–2007, we found out that high normative institutional distance leads to the preference for wholly owned subsidiaries, which is opposite to our hypothesis and findings of previous studies. Moreover, the impacts of regulative institutional distance and international experience of the firm on ownership strategy are found to be nonsignificant in our study.