The Impact of Institutional and Infrastructure Distance on the Cross-border Alliance Governance

Drawing upon the institution theory and institutional distance perspective, this paper examines the influence of institutional and infrastructure distance on cross-border alliance governance mode. Using 1,334 dyadic alliances between MNEs from emerging economies and MNEs from developed economies, the results clearly demonstrate that both formal and informal institutional distance affect the alliance governance mode (i.e., equity versus contractual mode). Moreover, infrastructure distance significantly plays moderating role on the relationship between formal institutional distance and propensity of choosing equity alliance mode. Given MNEs from emerging economies possess adversity advantage, when host countries are developed economies, the effect of the distances on governance mode becomes trivial. This study contributes and extends more complete picture of cross border alliances literature.