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06.08.2019 | Research Article

Unbalanced Institutions in Market Transition: How Do They Matter for Firm Strategic Choices and Performance in Emerging Economies?

verfasst von: Weiping Liu, Jiatao Li

Erschienen in: Management International Review | Ausgabe 5/2019

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Abstract

The legal and economic institutions in emerging economies normally undergo major changes during the transition to a market economy. The development of legal and economic institutions in such economies is discussed, and two different development paths are analyzed. One relates to economies with relatively better-developed economic institutions, and the other to those with relatively better-developed legal institutions. A series of propositions are developed to explain how different imbalances in institutional development might influence market competition, firms’ strategic choices, and firm performance. A three-stage model of economic development is proposed which attempts to account for the two different situations.

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Dysfunctional competition is less likely to become prevalent when the development of economic and legal institutions is in balance, since even if the legal institutions are poorly developed, the similarly under-developed economic institutions constrain market entry and thus the level of dysfunctional competition.

There are different ways to define institutions and its multifaceted dimensions. Hoskinsson et al., adopt North (1990)’s definition of institution, i.e., focuses more on the formal rules and regulations that influence market transactions, but does not explicitly take into account infrastructures, intermediaries and factor markets as institutions. In contrast, Khanna and his colleagues see such constituents, especially, market intermediaries and infrastructures as critical factors that differentiate institutional environments of advanced economies from those of emerging economies. We follow Khanna and his colleagues to adopt a more broad definition.

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Titel: Unbalanced Institutions in Market Transition: How Do They Matter for Firm Strategic Choices and Performance in Emerging Economies?
verfasst von: Weiping Liu
Jiatao Li
Publikationsdatum: 06.08.2019
Verlag: Springer Berlin Heidelberg
Erschienen in: Management International Review / Ausgabe 5/2019
Print ISSN: 0938-8249
Elektronische ISSN: 1861-8901
DOI: https://doi.org/10.1007/s11575-019-00393-8

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