Is there a better commitment mechanism than cross-listings for emerging-economy firms? Evidence from Mexico

Received: 25 April 2006 Revised: 30 July 2008 Accepted: 6 August 2008 Online publication date: 12 March 2009 Abstract The last decade of work in corporate governance has shown that weak legal institutions at the country level hinder firms in emerging economies from accessing finance and technology affordably. To attract outside resources, these firms must often use external commitments for repayment. Research suggests that a common commitment mechanism is to borrow US securities laws, which involves listing the emerging economy firm’s shares on a US exchange. This paper uses a quasi-natural experiment from Mexico to examine the conditions under which forming a strategic alliance with a foreign multinational firm is actually a superior mechanism for ensuring good corporate governance. Journal of International Business Studies (2009) 40, 1171–1191. doi:10.1057/jibs.2008.113