This qualitative research explores how multinational enterprises (MNEs) respond to institutional pressure at home. Focusing on the case of China, a major source of outward foreign direct investment (OFDI) in the world, we analyze and theorize the meanings of firm actions within a policy regime designed for global competition. We find, in a country where its governments (both national and regional) seek OFDI development through policymaking, that domestic firms will confront these regulative interventions with four types of strategies—institutional compromise, institutional innovation, institutional manipulation, and institutional defiance—as they pursue value creation from internationalization. More importantly, these responses are driven by two key enabling conditions: the flexibility of the institutional arrangements and the actor’s position in the field. Our findings provide valuable insights for international business research surrounding the theme of home country institutional pressure and MNE agency.
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