Resource commitment in fragmented institutional environments: the mediating role of managerial attention to local responsiveness

Purpose This study aims to investigate how sub-national formal institutional differences affect firms’ extra-provincial resource commitment during domestic expansion. Drawing on the behavioural theory of the firm and institutional theory, this study develops an institutional bounded rationality argument in which institutional fragmentation redirects managerial attention towards local responsiveness, shaping commitment choices. Design/methodology/approach This study analyses 581 firm-year observations from 134 Chinese listed healthcare firms (2011–2019). Sub-national formal institutional differences are measured via semantic distance (Doc2Vec) between provincial healthcare-reform policy texts and aggregated by firms’ subsidiary exposure across provinces. Managerial attention to local responsiveness is operationalized as the salience of a validated keyword dictionary in annual-report management discussion and analysis. Hypotheses are tested with generalized estimating equations and mediation tests (Sobel and bootstrapping), complemented by robustness checks using alternative measures, structural equation modelling and instrumental-variable estimation. Findings Greater experienced sub-national institutional differences predict lower extra-provincial resource commitment and higher managerial attention to local responsiveness. Higher attention to local responsiveness is associated with lower resource commitment and partially mediates the institutional effect, indicating that attentional reallocation is a key but incomplete channel through which domestic institutional fragmentation discourages cross-provincial expansion. Originality/value The study shifts institutional-distance research from cross-border settings to within-country heterogeneity and offers institutional bounded rationality as a micro-foundational mechanism linking institutional fragmentation, managerial attention and resource commitment. By evidencing an attentional pathway in a highly regulated emerging-economy industry, it clarifies why firms adopt flexibility-preserving expansion architectures and informs policy efforts to reduce cross-provincial compliance frictions.