Does institutional distance still matter in re-entry decisions? Unveiling an inverted U-shaped relationship

Purpose Although institutional distance and entry decisions have long been key topics in international business (IB) studies, little attention has been paid to how institutional distance influences re-entry decisions involved in re-entering international markets. To address this research gap, this study aims to investigate the non-linear relationship between institutional distance and re-entry decision, as well as the moderating effect of potential slack on this relationship. Design/methodology/approach This study examines Japanese multinational enterprises that re-entered Southeast Asian markets after exiting between 2010 and 2020. It also tests whether the relationship between institutional distance and the re-entry decision follows an inverted U-shaped relationship, using a logit regression on manually collected, unbalanced re-entry data. Findings The empirical findings reveal that institutional distance has an inverted U-shaped relationship with re-entry decisions. Although prospective re-entrants may draw on prior experience in markets with high institutional distance, the results show that this experience can ultimately cause hesitation in re-entry decisions, as the institutional challenges are deemed unacceptable. However, the results also indicate that having potential slack resources may flatten this relationship, with higher potential slack facilitating re-entry. Originality/value This study offers academic originality by examining the non-linear relationship between institutional distance and re-entry using a refined data set, distinguishing it from previous research. Additionally, by integrating the Uppsala Model, the distance perspective and the slack resource perspective, this study contributes to both re-entry and IB research by demonstrating, through testing the moderating effect, the dynamics of re-entry that have not been extensively explored.