Host Country Digital Governance and MNE Location Choice

Multinational enterprises’ (MNEs) foreign subsidiary location choices are shaped by host-country institutions, yet prior research has focused primarily on traditional institutional dimensions and has paid limited attention to the institutional realities of an increasingly digitally transforming global economy. Drawing on institutional theory, we theorize host-country digital governance as a contemporary, location-specific institutional characteristic that influences where foreign MNEs establish subsidiaries. We further examine the underlying mechanisms by showing how this relationship depends on digital governance distance between home and host countries and on the MNE industry digital intensity. Using an 11-year panel of British MNEs with subsidiaries in 120 host countries, we find support for our hypotheses that host-country digital governance is positively associated with foreign subsidiary establishment and that this positive association strengthens when the host country’s digital governance infrastructure is more advanced than the home country’s and when the MNE operates in more digitally intensive industries. This study contributes to research on MNE location choice, institutional theory, and institutional distance, and discusses practical implications and avenues for future research.