Abstract Establishing domestic cross-region alliances can be one of the most important ways to integrate domestic market and enhance size advantage for Chinese firms. However, the market fragmentation has brought the issue of legitimacy of cross-region operation and the differences of institutional environment among different regions, which have become challenged for most firms. In this paper, we first discuss the different influence of different control modes on alliance performance in the view of institutional theory. Second, we analyze how the external and internal legitimacy influence the choice of control modes in cross-region alliances. Then, combined with institutional theory and internationalization theory, we discuss the moderating role of institutional distance between different regions from the three dimensions, including regulatory, normative and cognitive institutions. Last, we propose a theoretical framework about the alliance control of Chinese domestic cross-region alliances in the circumstances of market fragment and put forward some suggestions for future research.
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