Witold Henisz | University of Pennsylvania (original) (raw)

Papers by Witold Henisz

We investigate the replacement of the traditional state-centered institutional model in the elect... more We investigate the replacement of the traditional state-centered institutional model in the electricity supply industry with a market-oriented neo-liberal model in 83 countries. We argue that the societal legitimacy of an institutional replacement is central to its survival during the period following the replacement's adoption. We find that, in adopting countries, governments were more likely to subsequently impede private investors in the industry when the neo-liberal model was deemed to lack legitimacy. We provide empirical evidence on the role of multiple mechanisms that influence the legitimacy of an institutional replacement, including several that link reforms in a country to the influence multilateral lenders such as the World Bank and IMF, as well as to the behavior of peer countries. Specifically, institutional reforms associated with financial support from multilaterals and reforms that diverge from those in peer countries are associated with a higher incidence of ex post government intervention that impedes the process of the state-centered models' replacement with the neo-liberal model.

International Journal of Project Management, 2006

We investigate the replacement of the traditional state-centered institutional model in the elect... more We investigate the replacement of the traditional state-centered institutional model in the electricity supply industry with a market-oriented neo-liberal model in 83 countries. We argue that the societal legitimacy of an institutional replacement is central to its survival during the period following the replacement's adoption. We find that, in adopting countries, governments were more likely to subsequently impede private investors in the industry when the neo-liberal model was deemed to lack legitimacy. We provide empirical evidence on the role of multiple mechanisms that influence the legitimacy of an institutional replacement, including several that link reforms in a country to the influence multilateral lenders such as the World Bank and IMF, as well as to the behavior of peer countries. Specifically, institutional reforms associated with financial support from multilaterals and reforms that diverge from those in peer countries are associated with a higher incidence of ex post government intervention that impedes the process of the state-centered models' replacement with the neo-liberal model.

This paper uses the reform of New Zealand's state-owned enterprises from 1984-1995 to highlight t... more This paper uses the reform of New Zealand's state-owned enterprises from 1984-1995 to highlight two lessons for public sector reform from New Institutional Economics. First, failure to apply agency, property rights and transaction cost theory in tandem can lead to time consuming pauses and policy shifts in a reform program. Second, a discriminating alignment between the institutional environment and the regulatory governance structure chosen is crucial for successful privatization in industries characterized by large economies of scale, high sunk costs and extremely political output such as telecommunications and electricity.

Academy of Management Proceedings, 2013

Legal, Political and Economic Dynamics, 2014

Witold J. Henisz The Wharton School, University of Pennsylvania 3107 Steinberg Hall-Dietrich hall... more Witold J. Henisz The Wharton School, University of Pennsylvania 3107 Steinberg Hall-Dietrich hall, 3620 Locust Walk Philadelphia PA 19104-6370 (215) 898-0788 (ph.) (215) 898-0401 (fax) henisz@wharton.upenn.edu ... Bennet A. Zelner Fuqua School of Business, Duke University POB 90120 Towerview Drive Durham, NC 27708 (919) 660-1093 (ph.) (919) 660-8037 (fax) bzelner@duke.edu ... As public discourse and public policy turn away from unfettered confidence in free ... We build this argument from a comparative historical analysis of Argentine, ...

Advances in Strategic Management, 2009

Abstract: This article posits that the effect of political hazards on the choice of market entry ... more Abstract: This article posits that the effect of political hazards on the choice of market entry mode varies across multinational firms based on the extent to which they face expropriation hazards from their potential joint-venture partners in the host country (the level of contractual hazards). As political hazards increase, the multinational faces an increasing threat of opportunistic expropriation by the government. Partnering with host-country firms that possess a comparative advantage in interactions with the host-country government can ...

Advances in Strategic Management, 2009

In 'The Institutional Environment for Multinational Investment', I argued that the "effect of pol... more In 'The Institutional Environment for Multinational Investment', I argued that the "effect of political hazards on the choice of market entry mode varies across multinational firms based on the extent to which they face expropriation hazards from their potential joint-venture partners in the host country (the level of contractual hazards). I sought to combine an international business perspective on country risk with a transaction cost perspective on counterparty risk. The identification of the interaction between the hazards associated with the political environment in the host country and the hazards associated with the transaction itself on the choice between a wholly owned subsidiary and a joint-venture as a market entry mode was purportedly the value added of the analysis. Since then the paper has been widely cited in multiple disciplines yet in not a single instance in either domain were those interactions highlighted or modeled. Instead, the emphasis by other authors has been on the importance of the country-level institutional environment and, in particular, the political hazards emanating from that environment, for country-level economic or policy outcomes, the price or magnitude of investment, the entry mode of investment or the performance of investment. Only a handful of third-party citations even considered the impact of population-level institutional factors, firm-level experience or attributes or transaction-level characteristics on the various dependent variables listed above. As opposed to exhibiting frustration at the lack of broad acceptance of the core argument of the paper, my own recent work concurs with the external community by focusing its attention on the operationalization and incorporation of additional features of the institutional environment into the study of strategic management. In this essay, I review the development of the literature on the institutional environment for multinational investment emphasizing the unanswered questions and topics for future research at the intersection of institutions and international business.

Policy Research Working Papers, 2005

Coercive isomorphism is a prominent source of institutional change. The literature to date has em... more Coercive isomorphism is a prominent source of institutional change. The literature to date has emphasized how actors that are powerful and legitimate (e.g., a national government) may coerce the adoption of reforms by dependent actors (e.g., state governments and other organizations whose activities are governed by the federal government). We observe that an actor's power alone may be sufficient to promote reform, regardless of the actor's legitimacy. However, such reforms are more susceptible to subsequent change than are those that emerge from processes not subject to the influence of external actors whose sway derives from their power alone. We develop and test our arguments in the context of the worldwide electricity provision industry by analyzing countries' adoption of reforms in response to conditional lending practices by multilateral organizations such as the World Bank and the IMF. We find that reforms adopted in response to coercive pressures exerted by these organizations encounter much greater resistance, and that the incidence of financial and economic crises, the absence of checks and balances in established political institutions, and the inexperience of investor coalitions dramatically increase the predicted level of resistance.

Academy of Management Proceedings, 2005

Academy of Management Proceedings, 2004

We examine the extent to which two sources of policy uncertainty influence foreign-owned subsidia... more We examine the extent to which two sources of policy uncertainty influence foreign-owned subsidiary exit rates. We find that prior peer exits and a firm's own experience under the current political regime both have a strong influence on subsidiary exit rates, particularly in the presence of policy uncertainty resulting from the existing structure of a host country's political institutions. A firm's own experience under the current political regime of a host country, however, enhances exit rates after changes in that regime. These findings point to tradeoffs between two strategies for moderating political uncertainty. Influence strategies can provide substantial gains to firms in uncertain policy environments so long as those environments themselves are not at risk of radical flux. As the probability that a policy environment could potentially enter a period of radical flux increases, a follow-the-herd strategy becomes more prominent as this strategy avoids the negative consequences of the rapid depreciation of the value of past organizational experience, in the event of a new political regime.

SSRN Electronic Journal, 2000

We investigate the replacement of the traditional state-centered institutional model in the elect... more We investigate the replacement of the traditional state-centered institutional model in the electricity supply industry with a market-oriented neo-liberal model in 83 countries. We argue that the societal legitimacy of an institutional replacement is central to its survival during the period following the replacement's adoption. We find that, in adopting countries, governments were more likely to subsequently impede private investors in the industry when the neo-liberal model was deemed to lack legitimacy. We provide empirical evidence on the role of multiple mechanisms that influence the legitimacy of an institutional replacement, including several that link reforms in a country to the influence multilateral lenders such as the World Bank and IMF, as well as to the behavior of peer countries. Specifically, institutional reforms associated with financial support from multilaterals and reforms that diverge from those in peer countries are associated with a higher incidence of ex post government intervention that impedes the process of the state-centered models' replacement with the neo-liberal model.

Institutional and Political Challenges, 2009

< p> This is the eBook version of the printed book. If the print book inclu... more < p> This is the eBook version of the printed book. If the print book includes a CD-ROM, this content is not included within the eBook version. From oil companies seeking rights to drill to consumer products firms attempting to forestall a consumer boycott, organizations often seek to influence political or social policy to achieve their own objectives. But to exert this influence, they need to understand the structure of political and social networks. In this chapter, Witold Henisz examines how information about the structure of political and ...

Engineering Project Organization Journal, 2012

Large, global, cross-sectoral, multi-phased civil infrastructure projects tend to be one-off proj... more Large, global, cross-sectoral, multi-phased civil infrastructure projects tend to be one-off projects for which transactions have no strong 'shadow of the future', but where elements of relational contracting are still ubiquitous. Such projects evolve through discrete phases-financial and technical feasibility, conceptual design, detailed design, construction, operations and renovation/replacement-each phase of which can be viewed as a discrete transaction during which key participants and stakeholders rotate in and out of the project. This discontinuity of participation across phases in the project's lifecycle creates a heretofore neglected contractual hazard of 'displaced agency'. Similar governance challenges arising from displaced agency are found in longlived aerospace and defence programmes, large-scale software initiatives and other sectors. We review, integrate, extend and apply economic, legal, sociological and psychological governance perspectives on relational contracts to address the extreme governance challenges of civil infrastructure projects. The transaction cost economics literature has pointed out that such projects require relational governance, but has not spelled out strategies to attain and sustain such structures. We set out a framework based on institutional concepts that integrates a range of strategies designed to enhance the efficacy of relational contracts, drawing not only on 'regulative' institutional supports (e.g. laws, regulations, contracts and their enforcement through mediation, arbitration or litigation), but also institutional supports that are 'normative' (e.g. socially shared expectations of appropriate behaviour and social exchange processes) and 'cognitive' (e.g. creating shared identities, scripts or conceptual frameworks to bridge differences in values or interests). We present a set of propositions as a first cut at a contingent, integrated framework to guide future research on governance of engineering projects, and ultimately to help managers select and deploy the appropriate mix of regulative, normative and cognitive governance mechanisms for each project.

IEEE Engineering Management Review, 2014

Global Strategy Journal, 2013

I present a decision process framework that informs the design and implementation of stakeholder ... more I present a decision process framework that informs the design and implementation of stakeholder influence strategy. This process combines insights from agent-based dynamic utility and dynamic network processes. Stakeholders strategically seek an outcome as close as possible to their preferred point but also wish to be on the winning side and not to pursue positions divergent from stakeholders with whom they have strong affective ties. Simulation analysis highlights important effects from embedding stakeholders within such an interdependent policymaking network. The resulting decision process framework can be used by firms to assess the likely dynamics within such a stakeholder network as well as to compare alternative treatments to that network for their efficacy in securing a favorable policy outcome, collective decision, or shift in group opinion.

SSRN Electronic Journal, 2000

Why do some countries adopt market-oriented reforms such as deregulation, privatization and liber... more Why do some countries adopt market-oriented reforms such as deregulation, privatization and liberalization of competition in their infrastructure industries while others do not? Why did the pace of adoption accelerate in the 1990s? Building on neo-institutional theory in sociology, we argue that the domestic adoption of market-oriented reforms is strongly influenced by international pressures of coercion and emulation. We find robust support for these arguments with an event-history analysis of the determinants of reform in the telecommunications and electricity sectors of as many as 205 countries and territories between 1977 and 1999. Our results also suggest that the coercive effect of multilateral lending from the IMF, the World Bank or Regional Development Banks is increasing over time, a finding that is consistent with anecdotal evidence that multilateral organizations have broadened the scope of the "conditionality" terms specifying market-oriented reforms imposed on borrowing countries. We discuss the possibility that, by pressuring countries into policy reform, cross-national coercion and emulation may not produce ideal outcomes.

SSRN Electronic Journal, 2000

We offer a simple model of policymaking emphasizing socialization and limits on human cognition t... more We offer a simple model of policymaking emphasizing socialization and limits on human cognition to explicate mechanisms of change in emergent (as opposed to established) institutions. Emergent institutions are more susceptible to change, and their opponents may use frames or existing reference points to illustrate inconsistency with prevailing notions of legitimacy. Broader institutional structures and specific organizational characteristics moderate pressure for change. This perspective has novel implications for strategy and policy design.

Advances in Strategic Management, 2002

We investigate the replacement of the traditional state-centered institutional model in the elect... more We investigate the replacement of the traditional state-centered institutional model in the electricity supply industry with a market-oriented neo-liberal model in 83 countries. We argue that the societal legitimacy of an institutional replacement is central to its survival during the period following the replacement's adoption. We find that, in adopting countries, governments were more likely to subsequently impede private investors in the industry when the neo-liberal model was deemed to lack legitimacy. We provide empirical evidence on the role of multiple mechanisms that influence the legitimacy of an institutional replacement, including several that link reforms in a country to the influence multilateral lenders such as the World Bank and IMF, as well as to the behavior of peer countries. Specifically, institutional reforms associated with financial support from multilaterals and reforms that diverge from those in peer countries are associated with a higher incidence of ex post government intervention that impedes the process of the state-centered models' replacement with the neo-liberal model.

International Journal of Project Management, 2006

We investigate the replacement of the traditional state-centered institutional model in the elect... more We investigate the replacement of the traditional state-centered institutional model in the electricity supply industry with a market-oriented neo-liberal model in 83 countries. We argue that the societal legitimacy of an institutional replacement is central to its survival during the period following the replacement's adoption. We find that, in adopting countries, governments were more likely to subsequently impede private investors in the industry when the neo-liberal model was deemed to lack legitimacy. We provide empirical evidence on the role of multiple mechanisms that influence the legitimacy of an institutional replacement, including several that link reforms in a country to the influence multilateral lenders such as the World Bank and IMF, as well as to the behavior of peer countries. Specifically, institutional reforms associated with financial support from multilaterals and reforms that diverge from those in peer countries are associated with a higher incidence of ex post government intervention that impedes the process of the state-centered models' replacement with the neo-liberal model.

This paper uses the reform of New Zealand's state-owned enterprises from 1984-1995 to highlight t... more This paper uses the reform of New Zealand's state-owned enterprises from 1984-1995 to highlight two lessons for public sector reform from New Institutional Economics. First, failure to apply agency, property rights and transaction cost theory in tandem can lead to time consuming pauses and policy shifts in a reform program. Second, a discriminating alignment between the institutional environment and the regulatory governance structure chosen is crucial for successful privatization in industries characterized by large economies of scale, high sunk costs and extremely political output such as telecommunications and electricity.

Academy of Management Proceedings, 2013

Legal, Political and Economic Dynamics, 2014

Witold J. Henisz The Wharton School, University of Pennsylvania 3107 Steinberg Hall-Dietrich hall... more Witold J. Henisz The Wharton School, University of Pennsylvania 3107 Steinberg Hall-Dietrich hall, 3620 Locust Walk Philadelphia PA 19104-6370 (215) 898-0788 (ph.) (215) 898-0401 (fax) henisz@wharton.upenn.edu ... Bennet A. Zelner Fuqua School of Business, Duke University POB 90120 Towerview Drive Durham, NC 27708 (919) 660-1093 (ph.) (919) 660-8037 (fax) bzelner@duke.edu ... As public discourse and public policy turn away from unfettered confidence in free ... We build this argument from a comparative historical analysis of Argentine, ...

Advances in Strategic Management, 2009

Abstract: This article posits that the effect of political hazards on the choice of market entry ... more Abstract: This article posits that the effect of political hazards on the choice of market entry mode varies across multinational firms based on the extent to which they face expropriation hazards from their potential joint-venture partners in the host country (the level of contractual hazards). As political hazards increase, the multinational faces an increasing threat of opportunistic expropriation by the government. Partnering with host-country firms that possess a comparative advantage in interactions with the host-country government can ...

Advances in Strategic Management, 2009

In 'The Institutional Environment for Multinational Investment', I argued that the "effect of pol... more In 'The Institutional Environment for Multinational Investment', I argued that the "effect of political hazards on the choice of market entry mode varies across multinational firms based on the extent to which they face expropriation hazards from their potential joint-venture partners in the host country (the level of contractual hazards). I sought to combine an international business perspective on country risk with a transaction cost perspective on counterparty risk. The identification of the interaction between the hazards associated with the political environment in the host country and the hazards associated with the transaction itself on the choice between a wholly owned subsidiary and a joint-venture as a market entry mode was purportedly the value added of the analysis. Since then the paper has been widely cited in multiple disciplines yet in not a single instance in either domain were those interactions highlighted or modeled. Instead, the emphasis by other authors has been on the importance of the country-level institutional environment and, in particular, the political hazards emanating from that environment, for country-level economic or policy outcomes, the price or magnitude of investment, the entry mode of investment or the performance of investment. Only a handful of third-party citations even considered the impact of population-level institutional factors, firm-level experience or attributes or transaction-level characteristics on the various dependent variables listed above. As opposed to exhibiting frustration at the lack of broad acceptance of the core argument of the paper, my own recent work concurs with the external community by focusing its attention on the operationalization and incorporation of additional features of the institutional environment into the study of strategic management. In this essay, I review the development of the literature on the institutional environment for multinational investment emphasizing the unanswered questions and topics for future research at the intersection of institutions and international business.

Policy Research Working Papers, 2005

Coercive isomorphism is a prominent source of institutional change. The literature to date has em... more Coercive isomorphism is a prominent source of institutional change. The literature to date has emphasized how actors that are powerful and legitimate (e.g., a national government) may coerce the adoption of reforms by dependent actors (e.g., state governments and other organizations whose activities are governed by the federal government). We observe that an actor's power alone may be sufficient to promote reform, regardless of the actor's legitimacy. However, such reforms are more susceptible to subsequent change than are those that emerge from processes not subject to the influence of external actors whose sway derives from their power alone. We develop and test our arguments in the context of the worldwide electricity provision industry by analyzing countries' adoption of reforms in response to conditional lending practices by multilateral organizations such as the World Bank and the IMF. We find that reforms adopted in response to coercive pressures exerted by these organizations encounter much greater resistance, and that the incidence of financial and economic crises, the absence of checks and balances in established political institutions, and the inexperience of investor coalitions dramatically increase the predicted level of resistance.

Academy of Management Proceedings, 2005

Academy of Management Proceedings, 2004

We examine the extent to which two sources of policy uncertainty influence foreign-owned subsidia... more We examine the extent to which two sources of policy uncertainty influence foreign-owned subsidiary exit rates. We find that prior peer exits and a firm's own experience under the current political regime both have a strong influence on subsidiary exit rates, particularly in the presence of policy uncertainty resulting from the existing structure of a host country's political institutions. A firm's own experience under the current political regime of a host country, however, enhances exit rates after changes in that regime. These findings point to tradeoffs between two strategies for moderating political uncertainty. Influence strategies can provide substantial gains to firms in uncertain policy environments so long as those environments themselves are not at risk of radical flux. As the probability that a policy environment could potentially enter a period of radical flux increases, a follow-the-herd strategy becomes more prominent as this strategy avoids the negative consequences of the rapid depreciation of the value of past organizational experience, in the event of a new political regime.

SSRN Electronic Journal, 2000

We investigate the replacement of the traditional state-centered institutional model in the elect... more We investigate the replacement of the traditional state-centered institutional model in the electricity supply industry with a market-oriented neo-liberal model in 83 countries. We argue that the societal legitimacy of an institutional replacement is central to its survival during the period following the replacement's adoption. We find that, in adopting countries, governments were more likely to subsequently impede private investors in the industry when the neo-liberal model was deemed to lack legitimacy. We provide empirical evidence on the role of multiple mechanisms that influence the legitimacy of an institutional replacement, including several that link reforms in a country to the influence multilateral lenders such as the World Bank and IMF, as well as to the behavior of peer countries. Specifically, institutional reforms associated with financial support from multilaterals and reforms that diverge from those in peer countries are associated with a higher incidence of ex post government intervention that impedes the process of the state-centered models' replacement with the neo-liberal model.

Institutional and Political Challenges, 2009

< p> This is the eBook version of the printed book. If the print book inclu... more < p> This is the eBook version of the printed book. If the print book includes a CD-ROM, this content is not included within the eBook version. From oil companies seeking rights to drill to consumer products firms attempting to forestall a consumer boycott, organizations often seek to influence political or social policy to achieve their own objectives. But to exert this influence, they need to understand the structure of political and social networks. In this chapter, Witold Henisz examines how information about the structure of political and ...

Engineering Project Organization Journal, 2012

Large, global, cross-sectoral, multi-phased civil infrastructure projects tend to be one-off proj... more Large, global, cross-sectoral, multi-phased civil infrastructure projects tend to be one-off projects for which transactions have no strong 'shadow of the future', but where elements of relational contracting are still ubiquitous. Such projects evolve through discrete phases-financial and technical feasibility, conceptual design, detailed design, construction, operations and renovation/replacement-each phase of which can be viewed as a discrete transaction during which key participants and stakeholders rotate in and out of the project. This discontinuity of participation across phases in the project's lifecycle creates a heretofore neglected contractual hazard of 'displaced agency'. Similar governance challenges arising from displaced agency are found in longlived aerospace and defence programmes, large-scale software initiatives and other sectors. We review, integrate, extend and apply economic, legal, sociological and psychological governance perspectives on relational contracts to address the extreme governance challenges of civil infrastructure projects. The transaction cost economics literature has pointed out that such projects require relational governance, but has not spelled out strategies to attain and sustain such structures. We set out a framework based on institutional concepts that integrates a range of strategies designed to enhance the efficacy of relational contracts, drawing not only on 'regulative' institutional supports (e.g. laws, regulations, contracts and their enforcement through mediation, arbitration or litigation), but also institutional supports that are 'normative' (e.g. socially shared expectations of appropriate behaviour and social exchange processes) and 'cognitive' (e.g. creating shared identities, scripts or conceptual frameworks to bridge differences in values or interests). We present a set of propositions as a first cut at a contingent, integrated framework to guide future research on governance of engineering projects, and ultimately to help managers select and deploy the appropriate mix of regulative, normative and cognitive governance mechanisms for each project.

IEEE Engineering Management Review, 2014

Global Strategy Journal, 2013

I present a decision process framework that informs the design and implementation of stakeholder ... more I present a decision process framework that informs the design and implementation of stakeholder influence strategy. This process combines insights from agent-based dynamic utility and dynamic network processes. Stakeholders strategically seek an outcome as close as possible to their preferred point but also wish to be on the winning side and not to pursue positions divergent from stakeholders with whom they have strong affective ties. Simulation analysis highlights important effects from embedding stakeholders within such an interdependent policymaking network. The resulting decision process framework can be used by firms to assess the likely dynamics within such a stakeholder network as well as to compare alternative treatments to that network for their efficacy in securing a favorable policy outcome, collective decision, or shift in group opinion.

SSRN Electronic Journal, 2000

Why do some countries adopt market-oriented reforms such as deregulation, privatization and liber... more Why do some countries adopt market-oriented reforms such as deregulation, privatization and liberalization of competition in their infrastructure industries while others do not? Why did the pace of adoption accelerate in the 1990s? Building on neo-institutional theory in sociology, we argue that the domestic adoption of market-oriented reforms is strongly influenced by international pressures of coercion and emulation. We find robust support for these arguments with an event-history analysis of the determinants of reform in the telecommunications and electricity sectors of as many as 205 countries and territories between 1977 and 1999. Our results also suggest that the coercive effect of multilateral lending from the IMF, the World Bank or Regional Development Banks is increasing over time, a finding that is consistent with anecdotal evidence that multilateral organizations have broadened the scope of the "conditionality" terms specifying market-oriented reforms imposed on borrowing countries. We discuss the possibility that, by pressuring countries into policy reform, cross-national coercion and emulation may not produce ideal outcomes.

SSRN Electronic Journal, 2000

We offer a simple model of policymaking emphasizing socialization and limits on human cognition t... more We offer a simple model of policymaking emphasizing socialization and limits on human cognition to explicate mechanisms of change in emergent (as opposed to established) institutions. Emergent institutions are more susceptible to change, and their opponents may use frames or existing reference points to illustrate inconsistency with prevailing notions of legitimacy. Broader institutional structures and specific organizational characteristics moderate pressure for change. This perspective has novel implications for strategy and policy design.

Advances in Strategic Management, 2002