Informal Institutional Frameworks Research Articles

Digitalization of the Business Environment and Innovation Efficiency of Chinese ICT Firms

This study investigates how the digital business environment affects firms' innovation input variables. It was discovered that digitization leads to ongoing corporate environment optimization, which improves the effectiveness of innovation. One of the institutional environment factors, digitalization, increases the redundancy of government subsidies on businesses' investments in innovation. It also helps to eliminate duplication in innovation investment through the financial environment and the protection of legal rights. With increasing marketization in the informal institutional framework, the degree of R&D investment redundancy lowers while R&D human resource investment redundancy grows. Digitization not only lowers the grade of innovation, but it also has a negative association with the duplicate nature of commercial R&D investments. The authors' research combines institutional environment theory and digital development to establish a new empirical foundation for corporate development in order to boost innovation efficiency.

Three decades of research on cross-border mergers and acquisitions: A literature review and future research agenda

This study reviews 191 empirical articles published from 1990 to 2020 in A* and A category journals recognized by the Australian Business Deans Council (ABDC). We adopt the theories-contexts-characters-methods (TCCM) protocol to review and present the consolidated findings and set future research agendas in cross-border mergers and acquisitions (CBA) activities. Our review findings suggest that scholars have used institutional theory consisting of the formal and informal institutional framework, resource-based view, macro economic theory, information asymmetry, agency theory, ownership, location, and internalization (OLI) framework, and multi-theoretical framework covering transaction cost economics, information cost, real options theory, knowledge-based view, organization learning theory, and likewise related antecedents in the CBA research. Most of the existing knowledge is either from developed markets or global markets, and at a rapid pace, scholars are investigating emerging markets’ outbound CBA activities.

Challenges in Land Use and Transport Planning Integration in Helsinki Metropolitan Region—A Historical-Institutional Perspective

Land use and transport integration has been considered a must-have approach in achieving sustainable urban development. However, successful applications of the concept have been few, as institutional reforms to support land use and transport integration have lagged behind. Accordingly, this article argues that understanding difficulties in land use and transport integration requires an analysis of the long-term evolution of formal and informal institutional frameworks in planning practices. For this purpose, this article presents a case study of land use and transport planning in Finland’s Helsinki Metropolitan Region, which combines interview research on planners’ perceptions with a document analysis of the historical trajectories of the region’s plans, policy documents and related institutional and organizational changes. The historical-institutional approach of the article draws on discursive institutionalism as a novel analytical approach for studying how land use and transport integration is institutionally conditioned.

Systemic corruption and disorganized anticorruption in Italy

TThis paper provides, trough different indicators, empirical evidence on the presumably high relevance of corruption in Italian politics and administration, providing an explanation of how this “obscure” side of Italian politics – a pervasive market for corrupt exchanges – has found its way to regulate its hidden activities within an informal institutional framework, i.e. systemic corruption. A general theoretical framework for the analysis of limits and “windows of opportunity” in Italian anticorruption policies will then be provided, crossing the degree of salience and politicization of corruption issue to explain how in different periods such variables shaped such policy arena. Finally, it will be shown how occasionally this dark side of Italian politics clashed with the clean side of politics, focusing on the reasons of the weak political accountability of Italian politicians involved in corruption scandals in the last decades.

International Entrepreneurial Orientation and Performance of SMEs: The Mediating Role of Informal Institutional Framework

This article identifies the mediating role of informal institutional frameworks upon the relationship between the international entrepreneurial orientation (IEO) behavior of small and medium-sized enterprises (SMEs), and their perceived financial performance, while operating within a volatile business environment. To reach the study’s aim, we conducted a regression analysis upon SMEs operating in Turkey and implemented structural equation modeling on the construct to specify the validity of the model. The findings are that the indicated relationship is indeed mediated by informal institutional frameworks. However, IEO and financial performance relationship is negative. The practical implementation of IEO activities is risky when target market financial conditions are difficult, and the nature of relevant informal institutional frameworks should be considered before full commitment to IEO activities.

Collectivism, Entrepreneurship, Leadership, Innovation, and other Antecedents of Externally Financed Growth in Pakistani Firms

To foster firm growth, it is now established that access to finance through well-functioning capital markets is a necessary pre-requisite. Moreover, other factors like formal institutions embedded in the legal environment and framework also condition financial constraints at the macro level. Similarly, informal institutional structures like culture, Entrepreneurship, Leadership, and Innovation can also interact at the firm level, and serve as a constraint to the use of external finance in firms’ growth strategies. Internal factors affecting willingness are sometimes more important drivers as compared to external factors that enhance capabilities. This paper explored the role of these internal factors like Collectivism, Innovation, leadership, entrepreneurship, customer orientation, level of employee development, communication strategies, that serve as informal institutional frameworks that condition self-imposed external financial constrain in firms’ growth strategies. To establish empirical validity, data was gathered from 150 companies ranging from small to midsize organizations based in Karachi. Data were collected by conducting a survey using a close-ended questionnaire and analyzed using confirmatory factor analysis and structured equation modeling. The results suggested that communication strategies, level of employee development, entrepreneurship, and Innovation have a positive and significant effect on Externally Financed Growth. Interestingly, leadership affects growth negatively. The finding implies that firms' ability to overcome financial constraints is significantly affected by internal factors along with financial development.

Modi government plank & reforms for institutional development: An investigation

World is moving from socialist to capitalist’s mode of economy with an objective of fostering development with unabated pace for which nations are searching alternative approach of development. New institutional economics (NIE) is one such approach that has emerged recently which addresses issues of economic growth from a wide range ofperspectives such as political, cultural, legal, behavioral and social. The present-day NDA Government in India, led by Shri Narendra Modi is an epitome of this. This paper is exploratory and attempts an in-depth analysis of how the Modi Government has positioned the Indian economy on the trajectory of institutional development. His government has created both formal and informal institutional framework for creating, regulating, transforming markets and auguring the economy. In fact, Modi government plank for institutional development is aimed at fostering the mission of sowing the seeds of capitalism and India’s growth take-off.

Veza između strukture upravnog odbora i nacionalne kulture - komparativna analiza

As a result of the separation of ownership from control and relationship between the owners as principals and managers as agents, the so-called agency problem arises. In order to alleviate the agency problem in transition economies, internal corporate governance mechanisms are applied. Culture is considered as one of the most important factors within an informal institutional framework that is often associated with the effectiveness of corporate governance mechanisms. Starting from the fact that the board is an important internal mechanism, this paper examines the national culture as a determinant of the board structure based on a widely accepted cultural framework developed by Geert Hofstede. The aim of the research is to obtain relevant scientific knowledge on whether the board structure, analyzed through board composition and size, differs in countries that have similar dimensions of national culture. The research is carried out on a sample of 60 companies in Serbia and Montenegro. Relying on the T-test, the research showed that the boards composition in these countries differs, while their average size is the same. This pilot study mitigates the research gap that exists in domestic literature and represents the basis for future research in this area.

Illuminating the formal–informal dichotomy in land development on the basis of transaction cost theory

Transaction cost theory is largely used to investigate the formal domain of land and housing. In the informal domain, however, this perspective has been employed largely as a supplement in addressing the other fundamental notion in new institutional economics—property rights—despite the possibility that informality in land development can emerge regardless of the informality or formality of such rights. To cover this gap, this study developed a theoretical framework based on transaction cost theory to explain the formal–informal dichotomy in land development. The proposed framework maintains that land development depends on engaging in transactions that involve total or partial ownership of a combination of capital and land through lease and/or sale contracts, which enable landowners to earn from the new rental prices produced by the increase in land prices. Landowners are afforded two avenues from which to reduce transaction costs, namely, formal and informal institutional frameworks, each defining and enforcing restrictive rules on agents’ actions. These avenues, however, are simultaneously a source of new transaction costs that can affect the expected financial return of land development. Landowners therefore tend to choose the institutional framework that entails lower transaction costs but enables higher gains. Thus, the higher transaction costs associated with a formal institutional framework are the primary deterrents to the selection of this structure. In turn, informal land development continues to expand, regardless of the existence of formal prohibitive measures. We investigated the formal–informal dichotomy in the rural land development process in Tehran Province, Iran. The results indicated that transaction costs cause inefficiency in formal institutions, thereby driving the perpetuation of informal development.

Informal institutional framework and entrepreneurial strategic orientation: the role of religion

This paper attempts to clarify the role of religion in an informal institutional framework, and its impact on small and medium sized organisations' entrepreneurial strategic orientation. For this purpose a quantitative methodology is implemented. 117 SMEs operating in Istanbul are identified through probability and stratified random sampling. This study enhances the understanding of religion's role in institutional frameworks and consequently SMEs' entrepreneurial strategic orientation behaviour. Findings show that religion is an important component of an informal institutional framework, which influences SMEs' entrepreneurial strategic orientation behaviour. The practical implications are that SMEs operate under religious guidelines, although this is not a required but rather a voluntary alignment. This article will also highlight directions for future research.

The formal and informal institutional framework of capital accumulation

This paper studies the impact of social trust and formal legal institutions on capital accumulation in a panel of countries. The results not only confirm that both social trust and the quality of formal legal institutions have a positive impact on capital accumulation, but also show that they are substitutes. Specifically, the impact on capital accumulation of an upgrade of the quality of formal legal institutions is larger when social trust is low than when social trust is high, and vice versa. These findings apply both to total investment and to its foreign component, foreign direct investment.

Clanism

Abstract: * The objectives of this paper are: (1) to present and develop clanism as an indigenous management concept in Central Asia, and (2) to analyze the effect of clanism on a specific management function--human resource management (HRM)--in the concrete context of Kazakhstan. * This exploratory study employs a qualitative research. The data indicate that the degree to which clanism affects HRM practices depends, to a great extent, on the type of company. Clanism's effect is strong in state-owned companies and moderate in privately held companies, while it is weak in the subsidiaries of multinational companies. Furthermore, the influx of western MNCs has influenced Kazakhstani HRM in general and lessened the influence of clanism on HRM. However, some characteristics of the local labor market may strengthen the effect of clanism on HRM practices. * The paper proposes a definition of clanism; discusses the reasons for clanism's existence; investigates how clanism differs from other indigenous concepts, such as blat and guanxi; and analyzes how clanism affects HRM practices in Kazakhstan, a country that is strategically important for international management. Keywords: Clanism * Kazakhstan * Human resource management * Indigenous concept Introduction If newly developed economies (e.g., in Asia, South America, and Eastern Europe) are novel contexts that differ from the regions in which the bulk of management theories originated, research in these contexts must involve some contextualization if the limits of existing theories are to be discovered or if new theories to explain local phenomena are to be developed. (Tsui 2007, p. 1357) Why are indigenous management concepts essential to an understanding of management practices in emerging markets and transitional economies? The institution-based view of international business suggests that the formal institutions in emerging markets and transitional economies have less of an impact than the informal institutions that organize and govern those societies. Although some combination of formal and informal institutional frameworks shapes strategic choices (North 1990), advocates of the "third leg"[1] in the strategy tripod argue that "in situations whereby formal institutions are weak, informal institutions, such as norms governing interpersonal relationships, rise to play a larger role in driving firm strategies and performance" (Peng et al. 2008, p. 927). Therefore, in order to truly understand management practices in these economies, we must consider the powerful role of informal interpersonal social networks; how those networks adapt and change over time; and how they create, affect, constrain or undermine management practices in firms operating in these environments. Thus far, much of the literature has focused on the importance of such indigenous concepts as guanxi in China and blat in Russia. Indian dharma and South African ubuntu have also entered the discussion. One indigenous concept that is essential for understanding management practices in the emerging region of Central Asia has not yet attracted the attention of management scholars. Western political scientists refer to this concept as clanism (see e.g., Schatz 2004; Collins 2006). In the political science literature, a clan is defined as an informal organization comprised of a network of individuals linked by immediate and distant kinship, and by fictive kin identities. While kinship ties (blood ties) are rooted in the extended family, fictive kinship ties include individuals that are part of a network as a result of marriage, family alliances, school ties, long-lasting friendships or neighborhood affiliations (Collins 2006). Clanism has never been developed as a management concept and its implications for managerial practices have not been studied. This is unfortunate, as we believe that a deeper understanding of clanism as an indigenous management concept will contribute to debates on whether western managerial practices, ideas and concepts can coexist with local practices. …

Do country-level institutional frameworks and interfirm governance arrangements substitute or complement in international business relationships?

Interfirm relationships among partners from institutionally distant environments are subject to governance difficulties, owing to the paucity of shared cognitive and regulatory frameworks. We examine the potential of formal contracting and relational governance developed at the partnership level to overcome the formal and informal institutional gap at the country level. Empirical results from a sample of 184 international partnerships of large US firms support an overall substitutive relationship between informal institutional frameworks and interorganizational relational arrangements whereby the performance benefits of relational governance are reinforced at higher degrees of informal institutional distance. Contrastingly, formal institutional frameworks and contractual governance are found to have a complementary relationship, with performance gains from formal contracting undermined at higher degrees of formal distance.

Ethical Leadership

Ethical Leadership

Morality, social norms and the rule of law as transaction cost-saving devices: the case of ancient Athens

The importance of the institutional framework for economic development is widely accepted today and it is duly stressed in the economic literature. The protection of property rights, the enforcement of contracts and an efficient legal system are the pillars of the contemporary rule of law. However, formal institutions cannot function without being internalized by the citizens and without the strong backing of social norms. Morality and social norms are the major elements of the informal institutional structure, the social capital, which is also critical for social welfare and economic development. In this paper we will discuss both the formal and the informal institutional framework of Ancient Athens, which was a free market society with economic problems similar to contemporary market societies. Athenians developed a highly sophisticated legal framework for the protection of private property, the enforcement of contracts and the efficient resolution of disputes. Such an institutional framework functioned effectively, cultivating trust and protecting the security of transactions. This entire system however was based on social norms such as reciprocity, the value of reputation and widely accepted business ethics. Conformity to social norms as well as moral behavior was fostered by social sanction mechanisms (such as stigma) and moral education. The Athenian example is a further proof of the importance of morality and social norms as transaction cost-saving devices even in quite sophisticated legal systems. Their absence or decline leads inevitably to the need for more regulation and litigation and to a growing preference for clear-cut rules instead of discretionary standards. Athenian law was pioneering in the development of rules and institutional mechanisms suitable for the reduction of transaction costs, many of them surviving in the most complex contemporary legal systems.

Morality, Social Norms and Rule of Law as Transaction Cost-Saving Devices: The Case of Ancient Athens

The importance of the institutional framework for economic development is widely accepted today and it is duly stressed in the economic literature. The protection of property rights, the enforcement of contracts and an efficient legal system are the pillars of the contemporary rule of law. However, formal institutions cannot function without being internalized by the citizens and without the strong backing of social norms. Morality and social norms are the major elements of the informal institutional structure, the social capital, which is also critical for social welfare and economic development. In this paper we will discuss both the formal and the informal institutional framework of Ancient Athens, which was a free market society with economic problems similar to contemporary market societies. Athenians developed a highly sophisticated legal framework for the protection of private property, the enforcement of contracts and the efficient resolution of disputes. Such an institutional framework functioned effectively, cultivating trust and protecting the security of transactions. This entire system however was based on social norms such as reciprocity, the value of reputation and widely accepted business ethics. Conformity to social norms as well as moral behavior was fostered by social sanction mechanisms (such as stigma) and moral education. The Athenian example is a further proof of the importance of morality and social norms as transaction cost-saving devices even in quite sophisticated legal systems. Their absence or decline leads inevitably to the need for more regulation and litigation and to a growing preference for clear-cut rules instead of discretionary standards. Athenian law was pioneering in the development of rules and institutional mechanisms suitable for the reduction of transaction costs, many of them surviving in the most complex contemporary legal systems.

Formal and Informal Institutional Constraints and the Performance of Firms in Developing Economies: The Case of Egypt

The paper sets out to examine the effect of the interaction between the informal and formal institutional constraints on the investment performance of firms in Egypt. The paper endeavours to increase our understanding about the importance and the role of the institutional factors in business operations. The paper argues that the effect of the institutional factors on the performance of firms is contingent upon the quality and the level of compatibility between the formal and informal rules. The interaction between the formal and informal institutional frameworks determines the evolution of a system and how it works. The path of this evolution is sensitive to the quality of these two types of institutions. The main outcome of this study is that the performance of firms in developing countries is determined by a complex interaction of the formal and informal rules. Some theoretical and managerial implications are discussed.

Informal rules! Using institutional economics to understand service provision in Turkey's spontaneous settlements

Turkey's spontaneous settlements (gecekondus) house half the urban population and face infrastructure deficiencies that reduce quality of life and economic productivity while increasing the vulnerability of the urban poor. This article reports on research that used the new institutional economics to examine the formal and informal institutional frameworks for infrastructure provision in gecekondus. In theory, formal rules should create incentives that produce behaviour. However, a key finding was that rules are generally irrelevant. In fact, in the absence of credible formal rules, pressures arise that help shape informal rules which then result in behaviour. This has important implications for both institutional theory and daily practice.

Coping strategies for infrastructure: How Turkey's spontaneous settlements operate in the absence of formal rules

Spontaneous settlements known as gecekondus, hold more than half of the urban populations in Turkey's major cities. New gecekondu settlements continue to spread because of constraints on the supply of serviced land and affordable housing combined with lax preventive measures. Thus demand for infrastructure and services has increased in both densifying former gecekondus and new peri-urban settlements, as have related poverty and environmental problems. This study examines the formal and informal institutional frameworks for infrastructure provision in Turkish cities. The research discovered that the formal rules governing service delivery are largely irrelevant for infrastructure provision to gecekondus. Nevertheless, access to basic infrastructure and services in gecekondus is not a problem — although they are underserved, and there are real differences in the quality and quantity of services provided to gecekondus and other areas. In the absence of relevant formal rules, coping strategies — which enable the spontaneous settlements operate — are formulated by suppliers and consumers. Several planning implications are derived from these findings.

The impact of parties and unions on welfare statism

This article analyses the behaviour of parties and trade unions within the boundaries of formal and informal institutional frameworks and relates it to changes in the balance between social and economic welfare (the dependent variable). The analysis seeks to improve the existing models that account for variations in welfare statism by paying special attention to the varying room to manoeuvre of parties and unions and to the dynamic and cyclical character of the policy process. The analysis is configurative and based on bivariate regressions, thereby resulting in a hypothetical model that represents the relationships between parties, trade union power and the balance and level of social and economic welfare. One of the conclusions is that parties cannot influence the level of social and economic welfare, but only the pay‐off or trade‐off structure between these two components of welfare state performance, whereas the degree of corporatism can influence the level of social and economic performance, but not ...