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1. Introduction
Location decisions of multinational enterprises (MNEs) have received considerable attention from both scholars and practitioners as the choice of overseas location has the potential to either enhance or reduce firm performance (Jain et al., 2016). Over the recent years, the rising prominence of emerging-market MNEs is reshaping the global landscape. Since they exhibit distinct behaviors and growth strategies from those of their developed-country counterparts, the assumptions underlying traditional theories need to be re-evaluated in order to investigate how the distinctive attributes of emerging-market MNEs may affect their international expansion (Kim and Aguilera, 2016).
China is the most prominent within this trend of outward foreign direct investment (OFDI) from emerging economies, with some Chinese MNEs carrying out significant cross-border mergers and acquisitions (M&As). The leading role of state-owned enterprises (SOEs) in this process has been one of the distinctive characteristics since the very beginning. It is estimated that Chinese SOEs are responsible for about three-quarters of China’s OFDI stock (Sauvant, 2013). Regarding this governance structure, two recent literature reviews on foreign location choice suggest that non-market factors such as government ownership or connections to the government may be critical in determining location decisions of emerging-market MNEs (Jain et al., 2016; Kim and Aguilera, 2016).
Firms entering a host market face a high level of uncertainty stemming from several host country factors. Among these host country determinants of location choice, political risk has been extensively researched in the case of Chinese MNEs (Buckley et al., 2007, 2016; Duanmu and Guney, 2009; Guo et al., 2014; Han et al., 2014; Kang and Jiang, 2012; Kolstad and Wiig, 2012; Lv and Spigarelli, 2016; Quer et al., 2012). However, empirical evidence about how state ownership moderates the influence of political risk on location decisions of Chinese MNEs is still scant (Amighini et al., 2012; Duanmu, 2012, 2014; Ramasamy et al., 2012).
Moreover, Yuan and Pangarkar (2010, 2016) reported that managers of Chinese MNEs can address the uncertainty in foreign market entry by either repeating their past choices (inertial behavior) or by imitating other companies (mimetic behavior). Nevertheless, they did not analyze the moderating effect of state ownership on the proposed relationships between inertial and mimetic behavior and location choice of...