Regulation as Country‐Specific (Dis‐)Advantage: Smoking Bans and the Location of Foreign Direct Investment in the Tobacco Industry
| Author | Jo Crotty,Nigel Driffield,Chris Jones |
| DOI | http://doi.org/10.1111/1467-8551.12161 |
| Published date | 01 July 2016 |
| Date | 01 July 2016 |
British Journal of Management, Vol. 27, 464–478 (2016)
DOI: 10.1111/1467-8551.12161
Regulation as Country-Specific
(Dis-)Advantage: Smoking Bans
and the Location of Foreign Direct
Investment in the Tobacco Industry
Jo Crotty, Nigel Drield1and Chris Jones2
Rheolaeth a Busnes/School of Management and Business, Adelaid Rheidol/Rheidol Building, Llanbadarn
Aberystwyth SY23 3AL, UK, 1Warwick Business School, Warwick University, Coventry CV4 7 AL, UK, and
2Aston Business School, Aston University, Birmingham B4 7ET, UK
Corresponding author email: joc62@aber.ac.uk
This paper seeks to examine the relationship between smoking bans and the propensity
of tobacco firms to engage in foreign direct investment (FDI). Using international busi-
ness theory based on the firm-specific advantage/country-specific advantage (FSA/CSA)
matrix, the authors show that, contrary to what one may expect, smoking bans at home
are an important institutional intervention, reducing the propensityfor firms to engage in
FDI, even to countries without a ban themselves.
Introduction
The importance of institutions in both the context
of international business (IB), and indeed in
explaining variations in firm performance has
been in the spotlight for some time. Often, this is
discussed within the context of emerging markets,
and how improving institutions leads to firm
performance (Cuervo-Cazurra and Dau, 2009);
building on the broader seminal analysis of insti-
tutional quality by Crawford and Ostrom (1995).
This literature essentially argues that institutional
quality is a crucial driver of firm performance and,
in turn, international location decisions (Drield,
Jones and Crotty, 2013). Cuervo-Cazurra and
Ramamurti (2014) extend this by arguing that
institutional quality at home, within the contextof
emerging market multinationals, is an important
driver of internationalization, as firms seek to
Nigel Drield gratefully acknowledges support fromthe
Leverhulme Foundation through the award of a Lever-
hulme fellowship. Chris Jones gratefully acknowledges
the support of the British Academy.
‘escape’ poor institutional quality. However, such
analysis tends to rely on cross-countryassessments
of institutional quality in order to construct an in-
dex, which can then be used to explain the location
decision. Weseek, through a unique lens, to extend
this literature in examining the role of a specific
institutional intervention – the imposition of a
smoking ban – and its impact on the internation-
alization of tobacco firms. Our point of interest is
foreign direct investment(FDI) in the tobacco sec-
tor,which is to say, at the firm level, the acquisition
or creation of income-generating assets by a firm
resident in one country, but investing abroad.1
In itself, the continuing regulation and gov-
ernment intervention in this sector has received
widespread comment over a number of years,
and from a variety of perspectives. The exposure
of second-hand smoke on public health has
become a major policy concern for health ocials
across the world. The World Health Organization
1See, for example, http://www.oecd.org/daf/inv/
investmentstatisticsandanalysis/40193734.pdf
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