This thesis aims to extend previous research that discussed the role of business-government relationship on outward foreign direct investment (OFDI) by focusing on its performance consequences. Three research objectives are pursued to answer the primary research question on how connections the firms make with political actors at home country can influence the effect of the firm’s OFDI on its performance. Based on resource dependence theory (RDT) and institutional theory, two research frameworks are proposed to test the contingent value of the type of political actors and the host countries.
The research findings show that the effect of the home-country political connections and OFDI on firm performance varies depending on the type of political actors and the investment location. Political connections in aggregate influence the effect of OFDI on firm performance negatively, but, with the specific type of political actors and investment location, the political connections can facilitate OFDI to increase firm performance. Top-level political actors are not always beneficial to the firm’s OFDI in enhancing firm performance, but executive and legislative ties are useful. OFDI in developing countries, in general, benefits from home-country political connections, particularly with foreign-investment regulating and supporting agencies. OFDI in developed countries, in contrast, is hindered by high degree of political connections, especially with foreign-investment regulating and supporting agencies.
Based on the findings, this research extend existing research in international business by providing the evidence that home-country political connections can influence the firm’s OFDI to affect its performance. This study also extends the discussion on corporate political strategy by providing the contingent value of the type of political actors and the investment location that uniquely influence the role of political connections on OFDI and firm performance.
