An important step in the internationalization process of emerging economy firms is the shift from exports to foreign direct investment (FDI). We integrate the resource- and institution-based views to suggest that firms that can use unique institutional advantages are more likely to make this shift. We test these arguments with a longitudinal sample of 28,563 firm-year observations (1989–2005). We found that firms that are affiliated with a business group, have more firm- and group-level international experience, have more technological and marketing resources, and operate in service industries are more likely to shift from exports to FDI.