Abstract
This paper investigates the impact of institutional distances and the likelihood of foreign location choice for Indian Business Groups. In view of the relevance of institutional distance of the host-home nations, we test a longitudinal sample of 934 internationalization decisions of 211 Indian Business Groups from 1986 to 2018. We find that both high psychic distance (PD) leads to the propensity of the foreign location choice in institutionally distant countries, respectively. Furthermore, the experience gained from prior entries in the same or psychically similar countries acts as a firm-specific resource, aids towards the future decision of location choice. Additionally, extant literature advocates the role played by cultural and/or psychic factors in shaping formal institutions. Hence, we explore the relationship between various distances and location choice decisions. We also propose that the first hurdle, in the form of negative managerial perception, faced by MNEs’ towards the choice of a set of locations is represented by cultural and psychic distances. We found that formal institutional distance steers the location choice of Indian BGs towards advanced economies.