The second issue of Global Strategy Journal in 2019 is out! You can read it here: https://onlinelibrary.wiley.com/toc/20425805/2019/9/2. It contains a selection of articles analyzing different aspects of the relationships between institutional and global strategy, and an editorial outlining some suggestions for future research on this topic.
We hope that you find them insightful and useful for your research.
Alvaro Cuervo-Cazurra, Ram Mudambi, and Torben Pedersen, Co-editors of Global Strategy Journal
We review the relationships between institutions and global strategy and explain several clarifications for future research. First, studies need to clarify the standard used to assess quality in institutional dimensions they research rather than let readers assess them from the measures. Second, analyses need to specify the theoretical approach used, which may be based on the paradigm from a single discipline (economics, sociology, politics, psychology) or the integration of underlying disciplines, as often seen in management. This must form the basis of a consistent set of assumptions rather than a potpourri of arguments from incompatible logics. Third, investigations need to clarify the direction of relationship and mechanisms. On the one hand, studies on the impact of institutions on strategy should clarify the institutional influences used (adapt, appeal, avoid). On the other hand, research on the effect of strategy on institutional change should clarify the institutional strategies (inform, influence, incentivize) and institutional spillovers (compete, command, copy) by which firms change institutions.
This article studies two interrelated questions. First, why did business groups in emerging markets thrive and prevail after pro©\market reforms were implemented in their countries? And, second, what type of adaptation strategies can multinational corporations develop in order to be competitive in economies dominated by business groups? By conducting an archive©\based historical network analysis of business groups in Chile during periods of major economic and political transitions, we maintain that business groups were created in periods of protectionism as a way to navigate economies with strong state participation or inefficient markets. In this process, these groups endogenously created an economy with market imperfections resulting from the dominance of these business groups. This means that the transition toward more open markets did not necessarily create more competitive environments and that elites in emerging economies were unwilling to abandon the advantages of having links between their businesses. Multinationals entering this economy adapted by becoming business groups themselves and creating links with other business groups. In sum, strategies devised as means to reduce market imperfections created new imperfections that incentivized the business groups to retain their structure and forced multinationals to become business groups.
We analyze how a host market¡¯s institutional context can influence a multinational enterprise¡¯s (MNE¡¯s) senior management¡¯s choice and deployment of corporate political activity (CPA). First, we argue that a non©\engaged approach to CPA is likely to be chosen when senior management perceives high host country political risk, arising not only from host country political institutions, but also from the distance between home and host government relations. Second, we propose that the deployment of this approach can require active adaptation through four political strategies: low visibility, ensuring a minimal degree of general attention from other actors; rapid compliance, entailing high speed actions to obey the rules; reconfiguration, involving rearranging the MNE¡¯s structure and processes for competitiveness; and anticipation, implying the prediction of public policy and analysis of interest groups to anticipate responses.
We develop an institutional explanation for the finding that the competitive advantage publicly listed family firms (PFFs) enjoy over other publicly listed firms varies across emerging markets. We propose that PFF performance is contingent on the state of four types of institutions¡ªformal constraining, informal constraining, formal enabling, and informal enabling institutions. We test these ideas with a meta©\analysis of 177 primary studies, situated in 49 countries. Our results show that the competitive advantage PFFs enjoy is stronger when formal constraining institutions are less developed and when suitable informal enabling institutions are present. However, their competitive advantage is weaker when formal enabling and informal constraining institutions are less developed. We conclude that the competitive advantage of PFFs in emerging markets is contingent on local institutional conditions.
We argue that for firms competing in infrastructure industries, a change in the government that granted the permission to invest in the host country increases the likelihood of divestment of foreign subsidiaries. The logic surrounding this behavior lies in the fact that these firms may develop cooperative relationships with the granting government and that a power transition depreciates the relational capital accumulated and the effectiveness of the commitments achieved. Building on the literature on relational governance and the relational view of corporate political actions, we argue that this effect increases with host country governmental discretion and with investment longevity. An empirical analysis of the survival of foreign investments made by Spanish firms from infrastructure industries during the period 1986 to 2008 provides support for our hypotheses.
This article contributes to an improved understanding of the effects of subnational regional corruption on the external growth strategies of emerging economy firms. We examine the acquisition activity of firms in their home regions, in other parts of the country, and internationally. We consider four mechanisms through which a corrupt regional home context can affect firms¡¯ acquisition behaviors: (a) corrosive deal deterrence, (b) deal facilitation, (c) corruption escape into less corrupt contexts, and (d) enhanced corruption ability to acquire in similarly corrupt environments. Based on an analysis of the acquisition activity of 2,981 Russian firms established in 40 regions in Russia from 2001 to 2008, we find evidence for the existence of both deal facilitating and escaping effects of home region corruption.
This study examines the role of international institutional complexity, which is defined as the scope and multiplicity of institutional dimensions across foreign markets, on emerging market multinational companies¡¯ (EMMCs) innovation performance. We propose that international institutional complexity provides learning opportunities for EMMCs¡¯ innovation performance but also incurs higher management costs to handle information overload from overextended internationalization. We further propose that the host exposure and the heterogeneity of an EMMC's top management team (TMT) moderate the main effect of international institutional complexity on EMMC innovation. The empirical testing utilizes a longitudinal panel dataset of 7,072 foreign expansion steps by 767 Chinese firms from 2001 and 2010 and offers strong support for the proposed hypotheses.
Professor of Global Strategy, Northeastern University
Co-editor, Global Strategy Journal
Clarifying the relationships between institutions and global strategy, Global Strategy Journal
Frugality based advantage, Long Range Planning
Pro-market institutions and global strategy: The pendulum of pro-market reforms and reversals, Journal of International Business Studies
State ownership and international expansion: The S©\Curve relationship, Global Strategy Journal
Mexican Multinationals: Building Multinationals in Emerging Markets. Cambridge University Press