Learning about the institutional environment (original) (raw)
Related papers
Beyond the economic institutions of strategy: Strategic responses to institutional variation
Advances in Strategic Management, 2009
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.
Exploring the Role of Institutional Context in the Multinationality-Performance Relationship
We analyze the relationship between multinationality and firm performance from the perspective of differing institutional contexts. We use the institutional theory to develop a framework depicting the role played by institutional factors in the multinationality-performance relationship. It is argued that the institutional context has significant performance implications for multinational firms. This impact on the performance varies depending on the degree of multinationality the firm has already achieved.
Journal of International Management, 2016
The question of how institutional aspects can shape multinational enterprises' (MNEs) operations abroad and overall performance has received increasing attention in the international business literature. We address this issue by meta-analyzing the effects of home country formal institutions on MNEs' multinationality-performance (M-P) relationship using data from 170 independent studies covering over 54,600 firms from 26 countries. By focusing on specific policies such as capital market development, labor market flexibility, regulatory quality, control of corruption, and trade openness, we provide evidence that home country institutions can significantly influence MNEs' M-P relationship. From a multilevel approach, our findings indicate that a stronger institutional environment not always positively affects the M-P relationship. For developed market firms, the M-P relationship gets stronger with an improved institutional environment. However, in emerging markets, we find that the M-P relationship is actually weaker in cases of higher levels of home country labor flexibility and control of corruption. We discuss the implication of these findings showing that home country institutions have a significant and contrasting role in shaping MNEs' capacity to increase performance from their multinational investments.
Multinational corporations (MNCs) are subject to the various dimensions of the external institutional environments. Institutional theory suggests that MNCs need to conform to the prevailing rules, norms and procedures of the locations where they operate in order to survive and grow. This means that MNCs need to develop the best possible configuration of strategy-structure for their worldwide operations. Previous research has noted that in these conditions firms may simply seek to follow a referent other. However, MNCs' specific strategy for a focal foreign operation is likely to determine the entry mode for each host country. In certain circumstances it may be whether MNCs are pursuing a market-seeking strategy or a strategic resource seeking strategy that shapes the entry mode in face of the prevailing institutional pressures. We contribute to the understanding of entry modes into foreign markets as a reflection of a strategic choice that is bound by institutional constraints.
Multinationals and institutional competitiveness
Regulation & Governance, 2007
This article discusses how institutional competitiveness and multinationals are mutually enriching concepts. Multinationals transfer capital, technology, and knowledge into new settings. They allow subsidiaries access to new markets, new resources, and new processes. Potentially, therefore, institutional competitiveness can be increased by the presence of multinational corporations (MNCs) and their subsidiaries. However, this depends on the type of multinational and the type of institutional context. By differentiating two types of MNC in terms of shortterm and long-term orientations to investment, and two types of host institutional setting in terms of strength of institutional complementarities and interconnectedness, we develop a typology of four types of interaction between MNCs and institutional settings. We then analyze how each type influences institutional competitiveness. We conclude that these outcomes, while structurally shaped, are still dependent on how actors (individuals, firms, collective organizations, and governments) strategize to develop institutional frameworks in the context of highly competitive global markets.
The institutional environment for multinational investment
2000
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.
Erim Report Series Research in Management Erasmus Research Institute of Management, 2005
AND KEYWORDS Abstract The debate on globalization has long been characterized by theses of institutional convergence and divergence. The emergence of Anglo-Saxon shareholder capitalism as the dominant paradigm since the start of the 1990s is associated with the pursuit of global strategies by Multinational Enterprises (MNEs) and the consolidation of a multilateral trade regime. Yet the link between actual MNE strategies and developments in the institutional arena remains an understudied phenomenon. Tensions between multiple levels of institution buildingunilateralism, regionalism and multilateralism -create an environment of strategic uncertainty for MNEss. Consequently, MNEs' actual international strategies reveal much about perceptions of the institutional environment in which they operate and allows for the documentation of more subtle paradigm shifts. The internationalization strategies pursued by MNEs from the Triad over the 1990s reveal that a multilateral strategic reality was anticipated by only an elite few, while the vast majority of firms operated in a unilaterally-or at best regionally-determined institutional environment. This contribution suggests that institutional restructuring is multifaceted and sometimes contradictory, casting a new and more subtle light on the globalization debate. Free Abstract The debate on globalization has long been characterized by theses of institutional convergence and divergence. The emergence of Anglo-Saxon shareholder capitalism as the dominant paradigm since the start of the 1990s is associated with the pursuit of global strategies by Multinational Enterprises (MNEs) and the consolidation of a multilateral trade regime. Yet the link between actual MNE strategies and developments in the institutional arena remains an understudied phenomenon. Tensions between multiple levels of institution buildingunilateralism, regionalism and multilateralism -create an environment of strategic uncertainty for MNEss. Consequently, MNEs' actual international strategies reveal much about perceptions
Multinational corporations (MNCs) are subject to the various dimensions of the external institutional environments. Institutional theory suggests that MNCs need to conform to the prevailing rules, norms and procedures of the locations where they operate in order to survive and grow. This means that MNCs need to develop the best possible configuration of strategy-structure for their worldwide operations. Previous research has noted that in these conditions firms may simply seek to follow a referent other. However, MNCs' specific strategy for a focal foreign operation is likely to determine the entry mode for each host country. In certain circumstances it may be whether MNCs are pursuing a market-seeking strategy or a strategic resource seeking strategy that shapes the entry mode in face of the prevailing institutional pressures. We contribute to the understanding of entry modes into foreign markets as a reflection of a strategic choice that is bound by institutional constraints.
Different Forms of Agency and Institutional Influences within Multinational Enterprises
1 Abstract Purpose: Given their exposure to diverse institutional settings, decision making in multinational enterprises (MNE) is marked by inconsistencies and conflict. Within the comparative institutional analysis (CIA) literature, such inconsistencies are seen as a source of experimentation or innovation. By contrast, in the international business (IB) literature, institutions are primarily understood as constraints on MNE activity. The latter focuses on 'institutional effects' taking institutions as stable and determining of social agency. As a way of addressing this limitation, we aim to understand the conditions that enable actors to engage in strategic action despite institutional pressures towards statis. Methods: The research draws on systematic comparative case studies of two large MNEs in the chemical industry, headquartered in Germany and the UK, and operating in Italy, Germany, and Poland. It focuses on one example of agency, subsidiary efforts to change product formulations that are successfully developed by the headquarters.