Institutional distance and multinational enterprises’ FDI decisions in Portugal

Marcelo Duarte, Fernando Carvalho


Purpose: The purpose of this paper is to examine institutional distance effects on foreign multinational enterprises’ strategic FDI decisions in Portugal. Following a disaggregated distance construct, this paper also investigates the differentiated effects of each dimension of distance.

Design/methodology/approach: To test the proposed hypothesis a panel data analysis is used with random effects and regressions are estimated through Generalized Least Squares (GLS).

Findings: The results confirm the existence of a significant relationship between institutional distance and FDI decisions into Portugal, whereas the differentiated effects of each dimension were also confirmed, with seven out of nine dimensions of institutional distance being found to significantly influence those strategic decisions. Among them, administrative distance has been found to consistently deter foreign investment decisions in Portugal, likely due to legal issues.

Originality: Previous research in international business pointed to detrimental effects of distance on FDI decisions. By examining those decisions with a disaggregated construct, this study demonstrates that different dimensions of distance can affect FDI decisions differently. As the vast majority of international business studies focus on US firms, this paper contributes with a different point of view, expanding the empirical research of Portuguese studies and, consequently, that of international business outside the USA.


Keywords: Institutional distance; FDI decisions; Portugal; multinational enterprises; panel data




Título: "Decisões sobre o IDE e a distância institucional e empresas multinacionais em Portugal"


Objetivo: O objetivo deste artigo é examinar os efeitos da distância institucional nas decisões estratégicas de IDE das empresas multinacionais estrangeiras em Portugal. Após uma construção de distância desagregada, este artigo também investiga os efeitos diferenciados de cada dimensão da distância.

Desenho/metodologia/abordagem: Para testar a hipótese proposta, uma análise de dados em painel é usada com efeitos aleatórios e as regressões são estimadas pelo método dos Mínimos Quadrados Generalizados (GLS).

Resultados: Os resultados confirmam a existência de uma relação significativa entre a distância institucional e as decisões de IDE em Portugal, enquanto os efeitos diferenciados de cada dimensão também foram confirmados, com sete das nove dimensões da distância institucional influenciando significativamente essas decisões estratégicas. Entre eles, verificou-se que a distância administrativa impede constantemente as decisões de investimento estrangeiro em Portugal, provavelmente devido a questões legais.

Originalidade: pesquisas anteriores em negócios internacionais apontaram efeitos prejudiciais da distância nas decisões de IDE. Ao examinar essas decisões com um construto desagregado, este estudo demonstra que diferentes dimensões da distância podem afetar as decisões de IDE de maneira diferente. Como a grande maioria dos estudos de negócios internacionais se concentra nas empresas americanas, este artigo contribui com um ponto de vista diferente, expandindo a pesquisa empírica dos estudos portugueses e, consequentemente, a de negócios internacionais fora dos EUA.


Palavras-chave: Distância institucional; Decisões de IDE; Portugal; empresas multinacionais; dados do painel

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