The effect of informal and formal institutions on foreign market entry selection and performance

We investigate the impact of informal institutional distance and formal institutions on a key decision (namely location choice) of multinational enterprises (MNEs) when they expand abroad through foreign direct investment. The findings of the research that has analyzed these decisions have been non-conclusive, and this study aims to provide further theoretical and empirical evidence by considering the interaction effect of informal institutional distance and formal institutions in the location choice and its performance implications. Through an analysis of the internationalization of mobile telecommunications carriers, we demonstrate that formal institutions in a host country positively moderate the negative relationship between informal institutional distance and the likelihood of an MNE entering that country. Moreover, we find that those location choices that can be predicted through the institutional lens obtain higher performance than those entries that cannot be predicted through the interaction of informal and formal institutions.     

Value of Formalization for Women Entrepreneurs in Developing Contexts: A Review and Research Agenda

Formalization is constantly being proposed as being of great benefit to business expansion and success. This claim, however, has not been previously tested through a review of the empirical evidence, especially in relation to the large number of women in the developing world that operate in the informal economy. Therefore, the aim of this review is to systematize the current empirical evidence on gender, the informal economy and formalization, using a narrative synthesis of 76 papers. The papers were analysed along three main analytical themes – identity, institutions, and constraints and preferences – highlighting their conceptualization in studies of different academic disciplines – economics, sociology, entrepreneurship and development. The review calls for more accurate accounts of formalization decisions by widening the lens through which formalization decisions are conceptualized. These should take account of the rich contextual and temporal dimensions central to these decisions, and recognize that gender alone is not a sufficient factor in explaining women's choices in the informal economy. The review also highlights limitations in relation to the limited conceptual and empirical evidence on which development priorities such as formalization are set. The authors propose a research agenda centred on the need for conceptual frameworks that are more sensitive towards the multidimensional contexts of women's choices.     

Country institutional environments and international strategy: A review and analysis of the research

We review and analyze the growing body of literature that addresses the institutional context of international strategy. By examining articles in eleven major journals from January 2008 to July 2020, we identify six major categories of international strategies and implementation approaches: market entry and internationalization, political strategies, multinational technology and innovation, multinational corporate social responsibility, multinational headquarters and subsidiary relationships, and international human resources management. A parallel analysis of the relevant institutional variables categorizes institutions into eight types: economic institutions, political institutions, regulatory institutions, normative institutions, administrative institutions, cultural/cognitive institutions, demographic institutions, and knowledge institutions. These eight categories allow us to contextualize the institutional environment in which the six international strategies and implementation approaches are employed. Our review identifies important progress in international strategy research that has yielded a greater understanding of institutional impact on multinational activities. Yet, it also reveals that many areas of international strategy research remain fragmented, highlighting the need for future research and suggesting new directions for such investigations. Our analysis concludes by identifying knowledge gaps in each of the six strategy categories and making a series of suggestions for relevant future research.     

Institutional transitions,global mindset,and EMNE internationalization

Recently revised theoretical explanations of the internationalization process have been offered to specifically account for the propensity of Emerging Market Multinationals (EMNEs) to engage in accelerated internationalization. However, this literature stream has yet to consider how the fundamental institutional transitions occurring in emerging markets promote the individual and organizational level global mindset that helps account for this accelerated, proactive international expansion. Our dynamic multi-level conceptual framework examines the influences of both the home country institutions and intra-organizational mindsets on the development of EMNE outward FDI decision making. This framework contributes to extant literature by integrating conceptualizations of national culture with the informal and formal institutions offered by institutional theory, while examining how fundamental shifts in these influence the intra-organizational context. Furthermore, our conceptual framework adopts a multi-level perspective of global mindset as an antecedent of firm decision making and adds to the global mindset literature by arguing that institutional transition is a macro level antecedent of global mindset.     

Multinational Enterprises and the Provision of Collective Goods in Developing Countries under Formal and Informal Institutional Voids. The Case of Electricity in Sub-Saharan Africa

Despite their unprecedented growth, developing countries still face severe problems in the provision of collective goods. Electricity, whose provision is scarce or unreliable in most developing regions, especially in Sub-Saharan Africa, is an emblematic case. The reason for this shortage is not only imputable to the lack of effective formal institutions, but also to the inefficacy of informal institutions in enabling alternative solutions for the production, transmission and distribution of electricity. We claim that in this context of “double institutional void”, foreign direct investment (FDI) and multinational enterprises (MNEs) can play a decisive role. However, their effectiveness depends on both the formal and informal institutional proximity between the home and the host countries. Our empirical analysis relies on panel data models run on a sample of pairs of home-host countries, the latter of which are all from Sub-Saharan Africa (SSA), observed from 2005 to 2011.     

Culture,connectedness, and international adoption of disruptive innovation

Why might nations vary in whether and how fast to adopt potentially disruptive innovations? Our study investigates this issue, specifically how a nation's adoption of creatively destroying innovations is related to two previously unexplored variables: cultural looseness, which is a norm-based measure of informal institutions, and global connectedness. To highlight potential contributions from these new variables, we control for within-nation contextual variables examined in prior research, including formal institutions, Hofstede's dimensions of cultural values, socioeconomic attributes, and between-nation economic grouping. Our empirical analysis of a specific disruptive innovation, agricultural biotechnology adoption, covers 47 nations over a 14-year period and provides broad support for the usefulness of cultural looseness and global connectedness for understanding innovation adoption. Cultural looseness is significantly related to adoption of agricultural biotech. Global connectedness dimensions of depth and breadth are not directly related to adoption, only interactively with cultural looseness. These findings highlight the role of informal institutions and global connectedness in shaping complex interactions between disruptive innovation and industrial evolution within and across nations. The findings also have implications for what public policy makers might do to influence the extent of adoption of such innovations.     

Asian Family Firms through Corporate Governance and Institutions: A Systematic Review of the Literature and Agenda for Future Research

Although the corporate governance model of Asian family firms has recently gained increased attention, it remains unclear how these firms’ corporate governance mechanisms (and their effectiveness) differ from those of family firms in the western world. Drawing upon a comparative institutional perspective, this paper systematically reviews 148 published articles in peer‐reviewed journals from 1980 to 2015. The aim of this paper is to contribute to the understanding of institutional complementarities that constitute informal governance mechanisms adopted by Asian family firms by considering a wider set of institutional factors (i.e. political environment, cultural values and social norms) embedded in the Asian context. The main findings suggest that: (i) given the lack of market‐supporting institutions and the presence of strong political control over Asian economies, family firms tend to cultivate political connections to respond to the failure of legal systems; (ii) Asian family firms still rely heavily on personal networks (e.g. guanxi) to reduce uncertainty, strengthen business ties, and gain access to external resources; and (iii) cultural values and social norms (e.g. ‘face’ saving, reputational concerns and adult child adoption) lead to functionally equivalent corporate governance mechanisms in Asian family firms. The downstream effects of such mechanisms are also discussed, and future research avenues are identified.     

Subnational Institutions and Location Choice of Emerging Market Firms

I examine how subnational institutions of emerging markets affect the location choice of emerging market firms. I argue that the weak institutions in emerging markets push firms to acquire the skills needed for survival in unfavorable institutional environments. When they start their international venturing, such knowledge, skills, and capabilities will become their unique advantage, which makes them more resilient to red tape, nepotism, and corruption in the host countries. Using a sample of 143 outward FDI events of Chinese multinationals, I test the relationship between subnational institutions at home and firm propensity to enter a target market with weak institutional systems and found robust empirical support for the use of different estimation strategies. Further, my results demonstrate that the effect of subnational institutions at home on location choice is more pronounced in private enterprises compared to state-owned enterprises. This study reveals the importance of home country effects in location choice research and tests empirically the existence of institutional advantage.     

Engaging institutions in global careers: highly skilled self-initiated expatriates’ journeys through a Nordic welfare state

Recent years of research have highlighted the phenomenon of self-initiated expatriation and clarified the individual agency that underlies it, such as its motivational drivers, thereby depicting it as one form of boundaryless career. Yet as a consequence the role of wider institutional and structural contexts has been left under-theorized. This article provides a much needed examination of the interaction between institutional contexts and agency in self-initiated global careers. It advances the understanding of how self-initiated expatriates (SIEs) are influenced by and engage institutions in constructing their global mobility and careers. The research is a field-based study of SIEs’ encounters with the institutions of a Nordic welfare state and consists of interviews, observations, and document analyses. It makes a relevant addition to understanding how the self-directed expatriation of highly skilled professionals is institutionally moderated. It expands knowledge by showing how SIEs engage and potentially aim to influence public institutions and discourses to further their global mobility and work experiences and by providing a differentiated and distributed view of agency in self-initiated expatriation. While institutional environments condition global mobility and work experiences, they are potentially also influenced by the global talent that flows through them.     

Institutional agency by MNEs: A review and future research agenda

Although the study of institutional agency by MNEs is gaining traction in the IB literature, there are gaps in our understanding of how MNEs purposively engage with institutions in home and host markets. By systematically reviewing 73 articles in 26 journals over a 17-year period, I assess the embeddedness of institutional agency in the IB field; and present key findings along societal and organizational field triggers, individual and organizational enablers and types of institutional agency, as well as the consequences for institutional maintenance, creation and transformation. The review demonstrates that very few IB studies explicitly examine MNEs' intentional actions in relation to institutions. Consequently, I call for an advancement in MNE strategy and structure debates to account for the ways in which MNEs can address institutional contradictions. I develop propositions on these as well as micro-level activities that offer opportunities for MNEs to display institutional agency, setting a clear agenda for future research.     

How do formal and informal institutions influence firm profitability in emerging countries?

Drawing from institutional economics, we examine how the quality of formal institutions (e.g. protection of property rights, efficiency of the judicial system and government regulations) and a particular aspect of informal institutions, trust, influence the profitability of small and medium-sized enterprises (SMEs) vis-à-vis large firms. Our theoretical framework, which is supported by an analysis of over 205,000 observations in 16 emerging countries in the Central and Eastern European (CEE) region, explains why informal and formal institutions have a considerably different effect on the profitability of SMEs and large firms, and indicates that while SMEs benefit from formal institutional quality more than large firms do, large firms benefit from trust in society more than SMEs. It further shows that formal institutions and trust substitute each other in influencing firm profitability and that this substitution effect is stronger for large firms.     

Regionalization vs. globalization in advertising research: Insights from five decades of academic study

This paper is a response to calls for more research into the regional–as opposed to global–level of international business operations (Rugman and Verbeke, 2004). Focusing on a key issue in international management, the standardization decision, this paper presents a systematic review of top journal articles published over the last five decades on the subject of advertising standardization at the regional level. The results of this review demonstrate that in the last decade studies have frequently taken a regional rather than international focus of analysis, suggesting a shift in research in line with regionalization theory. However, this study also shows that research on regional standardization has lacked consistency in relation to how the phenomenon should be defined and measured. We present a conceptualization of measurement approaches to international advertising standardization, propose a typology of approaches and discuss their implications for knowledge advancement in the area.     

Overcoming blind spots in global sourcing research: Exploiting the cross-sections between supply chain management and international business

This article reviews existing work on global sourcing and suggests a number of new theoretical directions for research in this area. We discuss how international business (IB) and supply chain management (SCM) research can benefit from increased cross-fertilization of themes and perspectives. We begin by introducing a taxonomy of global sourcing research, building on relevant insights from SCM research. We then generate recommendations for potential future research on global sourcing, particularly highlighting antecedents, processes, performance and contextual variables. SCM research employs the entire supply chain as the primary unit of analysis (rather than the individual firm), while IB research focuses primarily on international aspects, adapting to institutional contexts in a globalized world. Building on this complementarity, several specific empirical directions are proposed for future research directions.     

Poison or antidote: How subnational informal institutions exacerbate and ameliorate institutional voids

We explore the mechanisms through which subnational informal institutions exacerbate or ameliorate voids in national formal institutions. Informed by a within-country, cross-sub-region case comparison, we find two exacerbating mechanisms: Competition between the logics embedded in national and subnational institutions and the sabotage of a formal national institution by a void in a subnational informal institution. We also find two ameliorating mechanisms: Strong subnational informal institutions substitute for weak national institutions and bridge voids in formal institutions. Finally, we identify the conditions of expectation alignment and engagement associated with the competition, sabotage, substitution, and bridging mechanisms. Our findings contribute to institutional theory by providing a more subtle and contingent understanding of the interaction between informal and formal, and subnational and national, institutions. Our results also suggest ways in which constrained managers and bureaucrats can reduce the effects of voids in national formal institutions.     

基于中国上市公司的CEO更替与公司治理有效性研究

以中国上市公司为样本,采用2002～2005年的数据,从CEO更替的视角检验了中国公司治理的有效性.实证结果表明:中国的公司治理是有效的,即企业绩效差的CEO更可能被更换,但是这种有效性与正式制度安排的公司治理机制并不相关,这可能是非正式制度的公司治理机制发挥了重要作用.     

The Impact of Vicarious Experience on Foreign Location Strategy

MNEs can learn from the foreign investment experiences of other firms when evaluating their own foreign entry strategies. We argue that other firms' experiences reduce investment barriers arising from formal and informal institutional environments in host countries that are dissimilar from an MNE's home country, thereby encouraging new entry. Our empirical analysis of foreign entries by Japanese public manufacturing firms over more than a thirty-year period indicates that the prior experiences of other firms in a host country mitigate the negative effect of formal and informal institutional distance on entry decisions: as other firms' experiences in a host country increase, a firm is less deterred by greater institutional distance from entering the country. We also find that the distance-mitigating effect of other firms' experiences in different industries is less significant when a larger body of same-industry firm experience exists in a country, implying a substitution effect between different types of vicarious experience.     

机构投资者持股压力下证券分析师乐观倾向研究

荐股评级出现乐观倾向,是当前全球证券分析师行业存在的一个突出问题。基于欺诈三角理论,本研究从压力、机会和合理化解释三方面对分析师荐股评级乐观倾向成因进行了理论分析,并以2010～2012年间中国证券分析师发布的21054个荐股评级数据为研究对象进行了实证检验。结果表明机构投资者持股比例越高,证券分析师越倾向于发布乐观的评级报告,而且在乐观评级情况下,分析师所推荐股票达到或者超过其预测的概率越高。本文的研究有利于投资者更为科学地审视分析师的荐股评级,并为监管部门提供政策参考。     

机构投资者持股偏好、筛选策略与企业社会绩效

以中国上市公司为研究对象,采用最小二乘法和两阶段最小二乘法,借助EViews工具,检验中国机构投资者持股与企业社会绩效的关系,以考察机构投资者基于企业社会绩效的持股偏好和筛选策略,选取2005年至2009年沪深两市918家上市公司为样本进行实证检验。研究结果表明,机构投资者表现出对企业社会绩效的持股偏好,在制定持股决策时会考虑企业社会绩效,尤其是近两年的企业社会绩效。进一步对机构投资者进行分类研究表明,各类机构投资者持股与企业社会绩效关系的差异性较大,仅有基金表现出类似的持股偏好。机构投资者整体和基金的持股偏好是源于筛选策略的介入,正面筛选策略比负面筛选策略对持股偏好的影响程度更大,即机构投资者制定投资决策时以正面筛选策略为主要手段,负面筛选策略为辅。     

Managing “forced” technology transfer in emerging markets: The case of China

This paper explores how foreign multinational corporations (MNCs) manage risks associated with “forced” technology transfer (“FTT”) policies in emerging markets. Although MNCs are increasingly exposed to appropriability risks from these policies, how they respond is relatively understudied in international business (IB) research. We explore this topic based upon a survey and interviews with Western MNCs doing business in China, as well as a discussion about the recent US-China trade war. We find that, as traditional IB theory would predict, internally-oriented strategies (e.g., internalization, maintenance of informal intellectual property (IP), and control of technological centrality and sophistication) are often used to respond to FTT policies; however, the risks from such policies can sometimes be more efficiently managed by externally-oriented strategies (e.g., non-market activities and reliance on formal IP). We discuss how the co-evolution of MNCs' risk management strategies alongside changing value chains, IP institutions, and conditions determining the leverage of FTT policies appear to contribute to this phenomenon. We argue that IB research should more prominently recognize the role of externally-oriented strategies, not only internally-oriented ones, in managing the complex IP-related institutional challenges present in emerging markets today.     

Learning by exporting: A system-based review and research agenda

Over the past four decades, flourishing empirical research has attempted to establish the mechanisms and conditions underpinning improvements in exporters’ innovation and productivity via the learning-by-exporting (LBE) effect, and the domain has gained legitimacy and empirical credibility. However, the literature's findings are largely fragmented and require systematic review and analysis to draw definitive conclusions on the factors that influence the subsequent realization of learning from exporting. To fill this void, we critically examine the extant LBE research for the period 1984–2021. We systematically review 167 articles to develop a system-based taxonomy and conceptual model of LBE, which comprises five major components: system outputs (productivity and innovation), inputs (e.g., institutional factors and resources), firm-level capabilities (e.g., absorptive capacity and innovation persistence), managerial characteristics (e.g., entrepreneurship skills) and internationalization strategies. In doing so, we uncover paradoxical tensions within the system brought about by the conflicting roles of some components of the LBE system, such as firm-, industry- and country-level technological capabilities. Our review also reveals research gaps that open relevant opportunities for further research and conclusions that hold novel implications for managers and policymakers.