Institutional Factors Impacting on International Construction Market Selection: Evidence from Chinese Contractors

Abstract

Institutions can be understood as the mechanism by which the rules societies operate under are formulated. As such, the international construction market is heavily affected by institutional factors. International market selection (IMS) is a fundamental decision that project contractors must make when entering the overseas arena. A variety of clues show that institutional factors have a complex impact on contractors’ IMS, but papers in this field tend to cover just one or two institutional factors or even ignore their role. Institutional factors exist in a multi-level social system, and the role of broader institutional factors in contractors’ IMS needs to be systematically explored. This study extensively collects institutional factors predicted to impact contractors’ IMS by literature review, selects 10 specific institutional factors from different perspectives, theoretically deduces their effects on contractor’s IMS, and takes international Chinese contractors’ IMS practice as the empirical research material and collects data for logistic regression analysis to test the assumptions. The results show that the IMS of contractors is affected by institutional factors from different levels and the effect of some factors on IMS must be weighted in a specific context. Specifically, IMSs of Chinese contractors are negatively affected by institutional distance but are not sensitive to the institutional environment. The results also confirm that if the host country and China have signed a trade agreement, belong to the same regional organization, or if China has provided foreign aid to a host country, Chinese contractors are more willing to choose the host market and central enterprises become more active in IMS than other firms. These findings can be expected to supplement IMS decision-making, with the empirical data presented affording an extension to the body of knowledge on contractors’ IMS process.