Localization Decisions in MNCs’ Global Marketing Strategies: The Dual Role of Institutional Distance and Managerial Cognition

This study examines multinational enterprises investing in China’s A-share market from 2015 to 2024 to explore the impact of institutional distance on localization decisions in the global marketing strategy of multinational corporations. It also analyzes the mediating role of managerial cognition and the moderating role of corporate political connections. The findings indicate that institutional distance has a significant positive impact on localization decisions. Specifically, the greater the institutional differences between the home and host countries, the more likely enterprises are to implement deep localization strategies to gain legitimacy and reduce operational risks. Managerial cognition plays a significant mediating role between institutional distance and localization decisions, with both managerial cognitive complexity and managerial cognitive centrality serving as significant mediators between formal institutional distance, informal institutional distance, and localization decisions. Corporate political connections further moderate this relationship. High-level corporate political connections amplify the positive impact of both formal and informal institutional distance on localization decisions, while low-level corporate political connections weaken it. This study develops a theoretical framework of “institutional distance - managerial cognition - localization decisions”, revealing the micro-mechanism by which institutional environments influence strategy through managerial cognition. It provides both a theoretical foundation and management insights for multinational enterprises seeking to optimize localization strategies in complex institutional environments.