This paper conceptualizes the heterogeneity of SOEs as an outcome of different institutional reform processes which create diversity between central and local SOEs along multiple organizational dimensions. It also theorizes the impacts of such characteristic differences on SOEs’ FDI strategies. We develop a trickle-down theoretical model drawing from the comparative capitalism and institutional theory. We advance the idea of ‘institutions-as-configurations’ to elucidate how the macro-institutional reform can lead to greater institutional diversity and subsequent emergence of different types of SOEs. Building on this logic, we argue that institutional changes leads to the renegotiation of firm boundaries, role realignment, and rechanneling of resources for SOEs affiliated with different levels of government, which in turn shape the way they seek institutional legitimacy when conducting FDI. Our main contribution lies in identifying macro patterns of institutional change as sources of micro level heterogeneity among SOEs and highlighting the implications of such diversity for SOE internationalization strategies. A number of testable propositions are derived to guide future empirical studies.
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