An institution-based view of international business strategy: a focus on emerging economies
01 Jul 2008-Journal of International Business Studies (Palgrave Macmillan UK)-Vol. 39, Iss: 5, pp 920-936
TL;DR: In this article, the authors argue that an institution-based view of international business strategy has emerged and is positioned as one leg that helps sustain the "strategy tripod" (the other two legs consisting of the industry- and resource-based views).
Abstract: Leveraging the recent research interest in emerging economies, this Perspective paper argues that an institution-based view of international business (IB) strategy has emerged. It is positioned as one leg that helps sustain the “strategy tripod” (the other two legs consisting of the industry- and resource-based views). We then review four diverse areas of substantive research: (1) antidumping as entry barriers; (2) competing in and out of India; (3) growing the firm in China; and (4) governing the corporation in emerging economies. Overall, we argue that an institution-based view of IB strategy, in combination with industry- and resource-based views, will not only help sustain a strategy tripod, but also shed significant light on the most fundamental questions confronting IB, such as “What drives firm strategy and performance in IB?”
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TL;DR: In this article, the authors investigate the impact of market-supporting institutions on business strategies by analyzing the entry strategies of foreign investors entering emerging economies and show how resource-seeking strategies are pursued using different entry modes in different institutional contexts.
Abstract: We investigate the impact of market-supporting institutions on business strategies by analyzing the entry strategies of foreign investors entering emerging economies. We apply and advance the institution-based view of strategy by integrating it with resource-based considerations. In particular, we show how resource-seeking strategies are pursued using different entry modes in different institutional contexts. Alternative modes of entry—greenfield, acquisition, and joint venture (JV)—allow firms to overcome different kinds of market inefficiencies related to both characteristics of the resources and to the institutional context. In a weaker institutional framework, JVs are used to access many resources, but in a stronger institutional framework, JVs become less important while acquisitions can play a more important role in accessing resources that are intangible and organizationally embedded. Combining survey and archival data from four emerging economies, India, Vietnam, South Africa, and Egypt, we provide empirical support for our hypotheses.
1,626 citations
TL;DR: In this article, the authors identify the emergence of the institution-based view as a third leading perspective in strategic management (the first two being the industry-based and resource-based views).
Abstract: This article identifies the emergence of the institution-based view as a third leading perspective in strategic management (the first two being the industry-based and resource-based views). We (a) review the roots of the institution-based view, (b) articulate its two core propositions, and (c) outline how this view contributes to the four fundamental questions in strategy. Overall, we suggest that the institution-based view represents the third leg of a strategy tripod, overcomes the long-standing criticisms of the industry-based and resource-based views' lack of attention to contexts, and contributes significant new insights as part of the broader intellectual movement centered on new institutionalism.
1,268 citations
Cites background or methods from "An institution-based view of intern..."
...The institution-based view adds significantly new insights to these questions by bringing institutions to the forefront of the research agenda (Ingram & Silverman, 2002; Peng et al., 2008)....
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...The fact that an institutional perspective is the most frequently drawn upon theoretical tool speaks volumes about the particular usefulness of this perspective when seeking to better understand the unfolding competition in emerging economies (Peng et al., 2008)....
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...Advocated by Peng (2002, 2006, 2009; Peng et al., 2008), the “institution-based view” label has helped us differentiate from existing work in economics and sociology, and has attracted a series of additional papers that carry this research forward (Gao et al....
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...While this article draws on a series of earlier work, its most recent and most direct companion paper is Peng, Wang, and Jiang (2008), which emphasized the institution-based view in international business strategy with a focus on emerging economies....
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...Differentiating from Peng et al. (2008), the current article is positioned to directly speak to the core literature in strategic management and does not deliberately emphasize the international aspects....
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TL;DR: In this article, the authors examine the co-evolution of MNE activities and institutions external and internal to the firm, and highlight the scope for firm-level creativity and institutional entrepreneurship that may lead to coevolution with the environment.
Abstract: This paper examines the co-evolution of MNE activities and institutions external and internal to the firm. We develop a theoretical framework for this analysis that draws on the more recent writings of Douglass North on institutions as a response to complex forms of uncertainty associated with the rise in global economic interconnectedness, and of Richard Nelson on the co-evolution of technology and institutions. We link historical changes in the character of MNE activities to changes in the institutional environment, and highlight the scope for firm-level creativity and institutional entrepreneurship that may lead to co-evolution with the environment. We argue that the main drivers for institutional entrepreneurship are now found in the increasing autonomy of MNE subsidiaries. Thus MNE agency derives from more decentralized forms of experimentation in international corporate networks, which competence-creating nodes of new initiatives can co-evolve with local institutions. Unlike most other streams of related literature, our approach connects patterns of institutional change in wider business systems with more micro processes of variety generation and experimentation within and across individual firms. This form of co-evolutionary analysis is increasingly important to understanding the interrelationships between MNE activities and public policy.
795 citations
TL;DR: The internationalization of new ventures from emerging economies to developed economies remains an unfilled gap at the intersection of the literature between international entrepreneurship and stra... as discussed by the authors, and the internationalization remains an open question.
Abstract: The internationalization of new ventures from emerging economies to developed economies remains an unfilled gap at the intersection of the literature between international entrepreneurship and stra...
680 citations
TL;DR: The authors applied competitive dynamics theory to analyze these contextual moderators of spillovers, and test hypotheses derived in a meta-analysis of the empirical literature on spillovers and found that spillovers vary across countries at different levels of economic development.
Abstract: Local firms may attract productivity spillovers from foreign investors, yet these vary with local firms' awareness, capability and motivation to react to foreign entry. In consequence, spillovers vary across countries at different levels of economic development. We apply competitive dynamics theory to analyze these contextual moderators of spillovers, and test hypotheses thus derived in a meta-analysis of the empirical literature on spillovers. Our analysis suggests a curvilinear relationship between spillovers and the host country's level of development in terms of income, institutional framework and human capital.
653 citations
Cites background from "An institution-based view of intern..."
...Moreover, which institutions affect the motivations of local firms, and how? Applications of dynamic competition theory along these lines may further enhance the emerging institutional view of international business strategy (Peng et al., 2008; Meyer, et al., 2008)....
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...Applications of dynamic competition theory along these lines may further enhance the emerging institutional view of international business strategy (Peng et al., 2008; Meyer, et al., 2008)....
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References
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TL;DR: In this article, the authors draw on recent progress in the theory of property rights, agency, and finance to develop a theory of ownership structure for the firm, which casts new light on and has implications for a variety of issues in the professional and popular literature.
49,666 citations
TL;DR: In this article, the authors examined the link between firm resources and sustained competitive advantage and analyzed the potential of several firm resources for generating sustained competitive advantages, including value, rareness, imitability, and substitutability.
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"An institution-based view of intern..." refers background in this paper
...A resourcebased view, exemplified by Barney (1991), suggests that it is firmspecific differences that drive strategy and performance....
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Book•
01 Jan 1990TL;DR: Douglass C. North as discussed by the authors developed an analytical framework for explaining the ways in which institutions and institutional change affect the performance of economies, both at a given time and over time.
Abstract: Continuing his groundbreaking analysis of economic structures, Douglass North develops an analytical framework for explaining the ways in which institutions and institutional change affect the performance of economies, both at a given time and over time. Institutions exist, he argues, due to the uncertainties involved in human interaction; they are the constraints devised to structure that interaction. Yet, institutions vary widely in their consequences for economic performance; some economies develop institutions that produce growth and development, while others develop institutions that produce stagnation. North first explores the nature of institutions and explains the role of transaction and production costs in their development. The second part of the book deals with institutional change. Institutions create the incentive structure in an economy, and organisations will be created to take advantage of the opportunities provided within a given institutional framework. North argues that the kinds of skills and knowledge fostered by the structure of an economy will shape the direction of change and gradually alter the institutional framework. He then explains how institutional development may lead to a path-dependent pattern of development. In the final part of the book, North explains the implications of this analysis for economic theory and economic history. He indicates how institutional analysis must be incorporated into neo-classical theory and explores the potential for the construction of a dynamic theory of long-term economic change. Douglass C. North is Director of the Center of Political Economy and Professor of Economics and History at Washington University in St. Louis. He is a past president of the Economic History Association and Western Economics Association and a Fellow, American Academy of Arts and Sciences. He has written over sixty articles for a variety of journals and is the author of The Rise of the Western World: A New Economic History (CUP, 1973, with R.P. Thomas) and Structure and Change in Economic History (Norton, 1981). Professor North is included in Great Economists Since Keynes edited by M. Blaug (CUP, 1988 paperback ed.)
27,080 citations
Posted Content•
TL;DR: In this article, the authors examine the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time.
Abstract: Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time. Institutions are separate from organizations, which are assemblages of people directed to strategically operating within institutional constraints. Institutions affect the economy by influencing, together with technology, transaction and production costs. They do this by reducing uncertainty in human interaction, albeit not always efficiently. Entrepreneurs accomplish incremental changes in institutions by perceiving opportunities to do better through altering the institutional framework of political and economic organizations. Importantly, the ability to perceive these opportunities depends on both the completeness of information and the mental constructs used to process that information. Thus, institutions and entrepreneurs stand in a symbiotic relationship where each gives feedback to the other. Neoclassical economics suggests that inefficient institutions ought to be rapidly replaced. This symbiotic relationship helps explain why this theoretical consequence is often not observed: while this relationship allows growth, it also allows inefficient institutions to persist. The author identifies changes in relative prices and prevailing ideas as the source of institutional alterations. Transaction costs, however, may keep relative price changes from being fully exploited. Transaction costs are influenced by institutions and institutional development is accordingly path-dependent. (CAR)
26,011 citations
Book•
22 May 1995
TL;DR: Early Institutionalists Constructed an Analytic Framework I Three Pillars of Institutions Constructing an Analytical Framework II Content, Agency, Carriers and Levels Institutional Construction, Maintenance and Diffusion Institutional Processes Affecting Societal Systems, Organizational Fields, and Organizational Populations Institutional processes Affecting Organizational Structure and Performance Institutional Change Looking Back, Looking Forward
Abstract: Introduction Early Institutionalists Institutional Theory and Organizations Constructing an Analytic Framework I Three Pillars of Institutions Constructing an Analytic Framework II Content, Agency, Carriers and Levels Institutional Construction, Maintenance and Diffusion Institutional Processes Affecting Societal Systems, Organizational Fields, and Organizational Populations Institutional Processes Affecting Organizational Structure and Performance Institutional Change Looking Back, Looking Forward
8,382 citations