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Institutional Impacts on Firm Internationalization addresses various aspects of the investigated phenomenon, providing an insight in the role of the varieties of capitalism on the globalization of business activities worldwide.



1. Institutions and International Business

Institutional theory (for analysis of the roots of institutional theory, see Bill and Hardgrave, 1981; Hodgson, 1994) is one of the most important perspectives in international business. Hence, it has attracted the attention of scholars in the last few years (Doh et al., 2012; Tihanyi et al., 2012; Wood and Demirbag, 2012). It has become so prevalent that it is sometimes difficult to delineate what is not an institution or what remains non-institutionalized in a home- or host-country context. Rightly so, institutional definitions differ within diverse theoretical streams of literature (Hotho and Pedersen, 2012). There are three quite different theoretical interpretations of institutions that in our view do not compete with each other, but there is quite a high level of congruity, complementarity and compatibility among them in terms of the core of their argument in relation to institutions being rules and belief systems that should be followed or established stable and resilient social structures which define and enforce the guiding principles for social behaviour. While North (1990) classifies institutions into formal (laws, regulations, rules) and informal (norms, practices, values), Scott (1995, 2008) categorizes the institutional pillars into regulative (laws, regulations, rules), normative (norms, practices) and cultural-cognitive (culture, ethics, morality, values), and Whitley (1992, 2010) labels the key institutions as proximate (laws, regulations, state structures, policies, labour system, financial system) and background (norms governing relationships, ethics, values).
Svetla Marinova

2. Convergence versus Divergence: Testing Varieties of Capitalism Perspective on the Globalization of Business Practices

The last decade has witnessed the emergence of a new and influential approach to the examination of international business that emphasizes the role of the so-called social system of production, incorporating such institutions as the educational system, the system of industrial relations, work organization and other socio-political factors contributing to the synergies between the associations, groups and strata that constitute modern industrial society (Hollingsworth and Boyer, 1997; Sabel and Zeitlin, 1997; Hall and Soskice, 2001).
Andrei Kuznetsov, Marcus Jacob

3. Institutional Determinants of Outward Foreign Direct Investment from Emerging Economies: A Home-Country Perspective

The growing international insertion of multinational companies originating from emerging economies (EMNCs) can be described as a major trend in the current world economic scenario. During the last two decades, outward foreign direct investment from such economies grew at a higher year average rate than those from developed economies. Their participation in the world outward FDI grew from 11 per cent in 2000 to 28 per cent in 2010, and their outward stock reached more than 15 per cent of the world FDI outward stock, compared with a performance of less than 10 per cent in the 1990s (UNCTAD, 2013).
Mohamed Amal, Bruno Thiago Tomio

4. Effects of Government Economic Policy on Outward Foreign Direct Investment: Experience from China and the EU

The last 30 years are characterized by rapid growth of global investment flows. Initially, the main investors were mainly from developed countries, whereas the importance of investors from emerging market economies has considerably increased during the last decade. At the same time, the importance of the State-Owned Enterprises (SOEs), both deriving from emerging market economies as well as developed economies, has significantly increased in outward foreign direct investment (Sauvant and Strauss, 2012). The purpose of this chapter is to compare the institutional and policy support for outward FDI in China and the EU. On the one hand, we aim to do this by evaluating the support for outward FDI provided by emerging and developed economies, and on the other hand, we analyse the effects of the emergent protectionist tendencies that lead to blocking inward FDI.
Witold Wilinski, Xiaoxin Li

5. Foreign Direct Investment Growth in China: Implications for Politics, the Economy and Culture

Foreign direct investment (FDI) and the essential role it plays in the financing of national economies, especially those in the developing and emerging countries, has received a great deal of attention in international business. Among the many developing countries seeking economic growth from FDI, China has undoubtedly been the most successful one; statistics show that it has been the most attractive FDI destination during the past three decades (UNCTAD, 2005). Following China’s announcement of its ‘Open Door’ policy, FDI into China has enjoyed unprecedented growth, as many multinational enterprises (MNEs) benefited from the preferential treatment offered by the Chinese national and local governments. While some foreign investors have experienced difficulties in establishing and/or repatriating their benefits from investments due to ideological and cultural differences, most have been effective in their FDI operations (Luo, 2000).
Attila Yaprak, Yingtao Xiao

6. Should Governments Support Outward FDI? The Case of Poland

Policy discussions in extant literature have been disproportionately centred around government support for inward foreign direct investment as compared to outward foreign direct investment (Solis, 2003; Te Velde, 2007; Buckley et al., 2010; Globerman and Chen, 2010). This apparently corresponds to the fact that the economic impacts of inward FDI have been widely discussed, while the economic impacts of outward FDI are far less understood, as the subsequent sections of this chapter illustrate. While there is no unanimous empirical support for a positive or negative impact of outward FDI on home economies (Globerman and Shapiro, 2008) and the impact of an increased internationalization degree has only an ambiguous influence on the economic performance of transnational corporations (TNCs) (Matysiak and Bausch, 2012), there is no universal basis for governments to promote or discourage outward FDI. Globerman and Shapiro (2008: 263) argue that ‘higher profits realized by owners of home-country TNCs do not justify public policies that subsidize or otherwise lower the costs of undertaking OFDI for home-country TNCs’, since such policies require efficiency improvement of the home economy, in the first place. However, they also argue that the linkages between outward FDI, globalization and the real income growth, which exist in developing countries, might not be as evident as in the case of developed countries.
Marian Gorynia, Jan Nowak, Piotr Trapczyński, Radosław Wolniak

7. Innovation in Emerging Economies: The Spillover Effects of Foreign Direct Investment and Institutions in Russia

Economic literature has long emphasized the positive relationship between innovation and economic growth (Baumol, 1968; Cooke, 1998). Innovation capability has been acknowledged to differ across countries and sub-national regions (Lee and Peterson, 2000; Acs et al., 2002; Fritsch, 2002; Michaelides et al., 2004). Academic literature, however, still lacks studies, examining the effect of the regional variations in the business environment on innovation output, for example, on patents, products or services (Rogers, 1998).
Natalya Smith, Ekaterina Thomas

8. The Role of Home Governments in Outward Foreign Direct Investment

This chapter pays particular attention to the significance of outward FDI institutional development concerning the role of the home institutions and the home government as a key institution in the context of China and Russia. The chapter’s insights are expressed in the form of propositions, an analytical framework and a model derived from existing perspectives and empirical data. First, a review of the scale of outward FDI from China and Russia and the relevance of the home government policy to the creation of institutional systems supporting outward FDI is presented.
Svetla Marinova, John Child, Marin Marinov

9. Structural Model of Institutional Environment Influence on International Entrepreneurship in Emerging Economies

There is general consensus in the field of international business research that the institutional environment provides an influence on the establishment of a firm’s operations across borders. For smaller firms, the role of the institutional environment becomes even bigger than for large multinational enterprises, as they lack bargaining power and typically have to play according to the existing rules of the game (Fujita, 1995; Coviello and McAuley, 1999; Knight, 2000; Hollenstein, 2005). In emerging economies, where the continuously changing legal framework neither provides significant support nor necessarily reduces the ambiguity of the external environment for small businesses, the role of informal societal institutions, such as personal networks and family ties, becomes greater than the role of formal ones (see e.g. Puffer and McCarthy, 2011; Shirokova and McDougall-Covin, 2012). A weak institutional environment potentially drives international entrepreneurship (IE) in emerging economies, as innovative small businesses start looking for opportunities abroad in order to avoid domestic institutional pressures (Boisot and Meyer, 2008; Rui and Yip, 2008). However, due to the high heterogeneity of the operational, institutional and market environments in emerging economies, our knowledge of the relationship between institutional factors and entrepreneurial motives of SMEs in international markets remains limited (He, 2012; Kiss et al., 2012; Smallbone and Welter, 2012).
Daria Volchek, Sami Saarenketo, Ari Jantunen

10. The Effects of Country and Industry Factors on the Competitive Advantage of European Construction Firms Operating in Russia

Construction industry is one of the controversial industries discussed in the business and management literature. Accordingly, there is no consensus regarding whether product-related or service-related theories should be used to analyse this industry. Also, research on the internationalization of construction firms is in short supply.
Andrei Panibratov

11. Understanding Failure in International Retailing: An Institutional Framework for Future Investigation

Retailing is rapidly becoming a global industry, and many of the world’s well-known retailers already derive a large part of their sales from international operations. The last two decades have witnessed increase in retail foreign direct investment (FDI) into a range of emerging markets across East Asia, Central and Eastern Europe and Latin America. A small group of food and general merchandise retailers from Western Europe, and to a lesser extent, North America have led the way (Coe and Wrigley, 2007: 341). On average, the top 250 retailers operated in 6.8 countries in 2007 up from 6.2 countries in 2006 and 5.9 in 2005 (Deloitte, 2009). In total, 21.3 per cent of sales came from outside retailers’ home countries (Deloitte, 2009). The average Top 250 European retailers had a presence in 14.9 countries in 2010, up from 11.1 countries in 2007, and over 40 per cent of their total sales were from foreign operation in 2010, up from 35.1 per cent in 2009 (Deloitte, 2012). French and German retailers are the most international in scope (Deloitte, 2012). The estimated global retail sale for the Top 250 retailers in 2010 was US$ 3.94 trillion (Deloitte, 2012).
Alphonse Aklamanu

12. Key Determinants of Retail Internationalization: Do Institutions Matter?

International retailing, linked to the current state of globalization, is on the move. Many retail establishments are internationalizing, although this process is not yet well understood. The institutional theory, as suggested by Huang and Sternquist (2007), may shed some important light on this critical topic.
Michael R. Czinkota, Svetla Marinova, A. Coskun Samli, Zhizhong Jiang

13. Firm Internationalization and Institutions: The Case of Pharmaceutical Retailing

Multinational enterprises (MNEs) operate in a dynamic, complex and volatile global economy. In order to survive and prosper in this turbulent environment, MNEs have developed numerous strategies to cope with diversity (Dunning and Lundan, 2008). The change within institutions has been especially evident in global economic development. Deregulation and shifts in consumer attitudes and behaviour alongside technological developments have created new opportunities for firm growth and development in the global economy. The transformation has been particularly prominent in the service sector during the past three decades. Thus, the context in which firms are embedded in and operate is becoming more important.
Anna Karhu

14. Tri-Space Framework for Understanding MNC Behaviour and Strategies: An Institutionalism and Business System Perspective

‘How do firms behave?’ has been a common question in strategic management (Rumelt et al., 1994), the answer to which leads to understanding firm strategies. Answering this question in international management (IM) is not as simple as it can be for domestic firms whose activities confine mostly in domestic context. Understanding MNC behaviour is complex because its behaviour is not shaped by the internal decisions of an MNC’s subsidiaries alone but also by external institutional factors and the MNC’s organizational network in which its headquarters (HQ) play dominant roles (Morgan et al., 2001; Collinson and Morgan 2009). The question ‘How do MNCs behave?’ is related to ‘What influences MNC behaviour?’ ‘How is this influence exerted?’ and ‘Where those factors lie?’ The third question — ‘Where those factors lie?’ — is important to understand in MNC strategy research, because an MNC has a complex organizational structure that extends across national boundaries and there is a multifaceted relationship between MNC organization and multiple exogenous factors from multiple spaces. Its HQ is located in one institutional space, while it operates in multiple institutional spaces, that is, across national borders and, it is even linked with and influenced by global institutional actors who lie at a global space, a space that is at least not located in a national institutional space. Thus, I want to present a framework using three different concepts that indicate three different spaces (a) institutionalism and business system (b) civil society (CS) and (c) transnational community (TC).
Mohammad Bakhtiar Rana


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