Hybrid regimes and international business: Exploring the interplay between democracy and authoritarianism in the belt and road initiative

International Business theories often assume that the external environment, including the policy environment, is invariant for multinational enterprises. Democracies are considered ideal environments for foreign direct investment. The Belt and Road Initiative (BRI) challenges this assumption. We argue that hybrid regimes, in which elements of democracy and authoritarianism coexist, can provide an appropriate environment for long-term trade and investment relationships for enterprises from these states. Drawing on the global factory framework of internalisation theory, we argue that the BRI is intended to provide a favourable institutional environment for Chinese multinationals to out-compete rivals. This argument is supported by an illustrative example of the China-Pakistan Economic Corridor.