Abstract
This study investigates the drivers of pressures from various institutions in the nonmarket environment and the responses of MNEs to these pressures in a host country. By taking a broad institutional perspective, this study pairs and integrates the economic perspective of new institutionalism and the sociological perspective of neo institutionalism with the corporate political strategy perspective. This research provides a systematic review of the drivers underlying pressures from various types of nonmarket institutions that explain the preference of firms to use a transactional or relational strategy to deal with these pressures. The evidence is based on research involving MNEs in the Netherlands. The nonmarket institutions that exert the greatest pressures at the national level pushing MNEs to use transactional more than relational strategies and tactics are regulatory and standards agencies. The pressures of political institutions, interest groups, and the media, in contrast, trigger MNEs to employ relational rather than transactional strategies and tactics.
Highlights
In the current competitive business landscape, it has become essential for most multinational enterprises (MNEs) to focus on the relationships with market actors, and with nonmarket institutions: Political institutions, regulatory and standards authorities, and social institutions, such as the media and interest groups (Hillman et al 2004; Mellahi et al 2016)
It is imperative to gain a better understanding of the perceived impact of nonmarket institutional pressures on MNEs, the underlying drivers of these pressures and how MNEs behave in a host nonmarket environment
Regulatory and standards agencies, and social institutions, such as the media and interest groups have progressively emerged, each responding to different societal needs or responding to different market and nonmarket issues
Summary
In the current competitive business landscape, it has become essential for most multinational enterprises (MNEs) to focus on the relationships with market actors, and with nonmarket institutions: Political institutions, regulatory and standards authorities, and social institutions, such as the media and interest groups (Hillman et al 2004; Mellahi et al 2016). MNEs must deal with various types of institutions and their pressures in the nonmarket context simultaneously. How they manage the pressures from these institutions depends on the perceived formal and informal power and obligations of the institutions. Our knowledge of the composition of drivers and perceived power of nonmarket institutions in a particular setting and the responses of MNEs is still limited (Hiatt et al 2015). Missing is an examination of how underlying drivers of pressures of various types of institutions affect the nonmarket behaviour of MNEs in a host environment (Lux et al 2011; Zhang et al 2016). It is imperative to gain a better understanding of the perceived impact of nonmarket institutional pressures on MNEs, the underlying drivers of these pressures and how MNEs behave in a host nonmarket environment
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