Cross-listing and foreign direct investment: an institutional arbitrage perspective on Chinese multinational enterprises

Purpose Through the lens of institutional arbitrage, this study considers the impact of cross-listing on foreign direct investment of multinational enterprises (MNEs) based in China. This study aims to propose that the advantages associated with cross-listing, identified as the credibility premium and mobility premium, significantly contribute to the international competitiveness of MNEs in constructing trade networks and overcoming market entry challenges. Design/methodology/approach Drawing on an analysis of over 20,000 foreign subsidiaries from China, it is found that cross-listing firms are more likely to have larger FDI portfolios and broader geographic dispersion than non-cross-listing firms. Moreover, the magnitude of these advantages depends on the institutional distance between the home and host countries. Findings The findings suggest that the benefits of cross-listing, particularly in terms of portfolio scope and geographic dispersion, are more pronounced in host countries with mature institutional frameworks. Originality/value This study contributes to the literature by enriching understanding of cross-listing beyond financial outcomes, thereby manifesting its effect on a firm’s international strategy. The research provides valuable insights into the internationalization strategies of Chinese multinationals and how a cross-listing strategy can provide a competitive advantage over domestic peers.