Institution-based Theory Research Articles

RESEARCH ON THE EFFECT OF OUTWARD FOREIGN DIRECT INVESTMENT AND INNOVATION INVESTMENTS ON ENTERPRISE PERFORMANCE

Based on the resource-based theory, reverse technology spillover theory and institution-based theory, this paper centers on the research of core issues of the influence mechanism of Chinese enterprises’ outward foreign direct investment (OFDI) in ASEAN on the enterprise performance. Meantime, with innovation input as an intermediary variable and the institutional distance between China and the ten ASEAN countries as an adjustment variable, it analyzes their impact on the relationship between OFDI acts and the enterprise performance. Taking 173 Chinese listed companies of OFDI in ASEAN 2009 to 2020, it studies relevant assumptions with the statistical analysis software Stata16.0. The results show that the enterprises’ OFDI in ASEAN serves as an incentive for the enterprise performance but there is also some hysteresis; innovation input has a positive impact on the enterprise performance; innovation input plays an intermediary role between OFDI and enterprise performance; the formal institutional distance between China and the host country negatively regulates the relationship between OFDI and enterprise performance.

How does government support promote firms' intellectual capital? An empirical analysis of micro-mechanisms

PurposeIn transitional economies, government support (GS) is considered to influence the development of the economy and industries and, consequentially, firms' intellectual capital (IC). However, empirical research has yet to explore the micro-mechanisms through which GS operates. Hence, the purpose of this study is to conduct an empirical inquiry into the specific role of GS on IC, considering the mediating effect of firm operational performance (OP).Design/methodology/approachCombining the institution-based theory, the resource orchestration paradigm and a dynamic perspective on IC, a new framework is constructed to evaluate the direct and indirect relationships existing among GS policies, firms' operational performance and IC. These processes and their outcomes are evaluated using mediating models with three steps and a panel regression based on panel data from 3,211 high-tech companies operating in China from 2008 to 2015.FindingsEmpirical findings confirm the existence of a significant direct relation between GS and IC and also suggest a mediating effect through operational performance.Originality/value(1) GS can be considered an institutional signal that boosts the attractiveness of a firm, thus enabling it to hire talent (human capital), build a wide network of relationships in the ecosystem (structural capital) and enhance its current relationships with financial service institutions and other stakeholders (relational capital). (2) This study, which considers GS an external resource, is one of the first attempts to explore how external resources influence firms' IC development through institutional pressures and mechanisms. The study confirms that multiple strategies exist through which government authorities and policymakers can influence firms' IC and in particular a combination of institutional factors and firm's resources and capabilities.

State governance and technological innovation in emerging economies: State-owned enterprise restructuration and institutional logic dissonance in China’s high-speed train sector

Can state governance spur firm innovation in an emerging economy and transform state-owned enterprises (SOEs) from “dying dinosaurs” to “dynamic dynamos”? We seek an answer to this question by investigating the innovative performance of restructured SOEs in China’s high-speed train sector. We expect that SOE restructuration will improve firm innovation, but that the degree of improvement will depend on how the state conducts firm governance. Building on institutional theory, we distinguish state governance via equity ownership and administrative affiliation in an emerging economy with market-hierarchy institutional conflicts. Under such conflicts, restructured SOEs experience institutional logic dissonance, which hinders organizational change for technological innovation. We hypothesize that state ownership exacerbates institutional logic dissonance at a restructured SOE, thus limiting innovation improvement from restructuration; in contrast, state affiliation mitigates firm dissonance and hence augments such improvement. We find empirical evidence for these hypotheses in a comprehensive panel of high-speed train manufacturers in China between 1989 and 2015. This study contributes to the institution-based theory of technological innovation in emerging economies. On the practical front, our findings suggest that emerging states may adopt arms-length governance to spur SOE innovation and unleash these dynamic dynamos to fuel sustainable economic growth.

Study of the Relationship between Political Connections and Corporate Re-Entrepreneurial Performance

Based on both resource-based theory and institution-based theory, this study places political connections, acquisition of entrepreneurial resources, institutional environment, and corporate re-entrepreneurial performance into the same research framework. Using data from 223 real estate companies in China as a sample and with the help of the statistical tools SPSS 22.0 and Mplus 7.0, the study examines the internal influence mechanism of political connections on corporate re-entrepreneurial performance as well as the mediating effect of acquisition of entrepreneurial resources and the moderating effect of institutional environment. The empirical results show that both explicit political connections and implicit ones have positive impacts on corporate re-entrepreneurial performance through the mediating effect of acquisition of entrepreneurial knowledge resources and entrepreneurial asset resources. Meanwhile, institutional environment positively regulates the relationship between political connections and corporate re-entrepreneurial performance. The results of the study suggest that political connections have positive impacts on corporate re-entrepreneurial performance under the circumstances of China’s transitional economy, but the impacts are restricted by institutional environment to a large extent.

Sustainability as a Strategy in the Chinese Automotive Industry: Managing Legitimacy Demands when Expanding to the EU

Sustainability refers the capacity to endure both environmentally and economically. In this paper, we take a look at both aspects of sustainability as we analyze the effects that new environmental sustainability standards, and compliance with those standards have on the Chinese automotive industry. We sought to understand if these new regulations provide an opportunity to enhance the success of Chinese automotive MNCs as they seek to expand to the European Union.In this analysis, we drew upon institution-based theory to understand the way Chinese automotive MNCs could leverage environmental compliance domestically as a competitive advantage when looking to expand internationally. Through investigating both formal and informal institutions within China and the European Union, we were able to identify overlapping environmental regulations. We then conducted interviews with credible sources to gain insight into how companies could leverage sustainability as a strategy to establish and maintain legitimacy in the European automotive industry. Through our research and qualitative analysis, we were able to develop three strategies that Chinese automotive MNCs could utilize to manage legitimacy demands when expanding into the EU.

Dynamics of the Subnational Regional Effect: Evidence from China

This study investigates the dynamics of subnational regional effects (SREs) over time using annual survey data of manufacturing firms in China from 1998 to 2007. SREs increase over time while China’s economy grows rapidly and globalizes and its institutions develop. This trend is explained by institutional divergence across regions over time. Institutional accessibility converges over time and moderates SRE growth as predicted. Based on proxies for institutions and institutional access, we find evidence consistent with the institution-based theory as the cause of these dynamics. Our findings suggest that dynamics of institutions and institutional access are important in determining firm performance. Furthermore, the importance of local institutions can increase even as an economy develops due to institutional path dependency.

Constructing Networks with Recessive Institutions: Examples from Argentina

The varieties of capitalism approach in Political Science and institution-based theory in Strategic Management contend that firms overcome institutional challenges in emerging markets through verti...

Foreign direct investment, institutional development, and environmental externalities: Evidence from China

The question of how foreign direct investment (FDI) affects a host country's natural environment has generated much debate but little consensus. Building on an institution-based theory, this article examines how the institutional development of a host setting affects the degree of FDI-related environmental externalities in China (specifically, industrial sulfur dioxide emissions). With a panel data set of 287 Chinese cities, over the period 2002–2009, this study reveals that FDI in general induces negative environmental externalities. Investments from OECD countries increase sulfur dioxide emissions, whereas FDI from Hong Kong, Macau, and Taiwan shows no significant effect. Institutional development reduces the impacts of FDI across the board. By focusing on the moderating role of institutions, this study sheds new light on the long-debated relationships among FDI, institutions, and the environments of the host countries.

Does Societal Culture Affect Public Service Motivation? Evidence of Sub-national Differences in Switzerland

ABSTRACT This article explores societal culture as an antecedent of public service motivation. Culture can be a major factor in developing an institution-based theory of public service motivation. In the field of organization theory, culture is considered a fundamental factor for explaining organization behavior. But our review of the literature reveals that culture has not been fully integrated into public service motivation theory or carefully investigated in this research stream. This study starts to fill this gap in the literature by using institutionalism and social-identity theory to predict how the sub-national Germanic and Latin cultures of Switzerland, which are measured through the mother tongues of public employees and the regional locations of public offices, affect their levels of public service motivation. Our analysis centers on two large data sets of federal and municipal employees, and produces evidence that culture has a consistent impact on public service motivation. The results show that Swiss German public employees have a significantly higher level of public service motivation on the whole, while Swiss French public employees have a significantly lower level overall. Implications for theory development and future research are discussed.

Why Does Family Firm Performance Vary in Emerging Markets? A Middle Range Institution-based Theory

We provide an institution-based theory explaining the substantial performance differences of publicly-listed family firms (PFFs) across emerging economies. We test this theory through a meta-analytic study, drawing on a dataset of 1,401 effect sizes harvested from 177 primary studies nested in 49 emerging economies. Our observation window spans the crucial period between 1973 and 2011, in which many emerging markets underwent rapid institutional changes. While our results show a small but significantly positive overall association between family control and firm performance in emerging market contexts, the cross- country variability in this relationship is very substantial. In order to explain this variability, we introduce a new typology for partitioning institutional effects, based on juxtaposing two salient dimensions of institutional development: formal versus informal, and constraining versus enabling institutions. This typology serves as the conceptual framework for our institution-based theory, whi...

Addressing Institutional Challenges with History: Two cases in the Argentine agricultural industry

The varieties of capitalism approach in political science and institution-based theory in strategy contend that institutional deficiencies in developing countries undermine the operation of markets...

Forging a comparative institutional advantage in Argentina: Implications for theory and praxis

This article argues that the incorporation of a revised version of the varieties of capitalism approach into international business literature and institution-based theory in strategy would enable scholars and practitioners to improve their understanding of how individual institutions and combinations thereof provide a basis for developing human resource practices suited to emerging markets. It elaborates on the varieties of capitalism approach by coining the term recessive institution to describe how firms draw on latent institutions to pursue policies not in accord with the dominant institutional context in which they operate. This article draws on the varieties of capitalism approach for Latin America to demonstrate how an industrial district and a large company in Argentina formed a comparative institutional advantage for producing mid-range, high quality products by using recessive institutions. It concludes by highlighting this article’s implications for human resource scholars and executives while also suggesting avenues for future research.

Are family ownership and control in large firms good, bad, or irrelevant?

Family ownership and control play an important role in large firms in Asia. There is a puzzle regarding the relationship between concentrated family ownership and control on the one hand and firm performance on the other hand. Three positions suggest that such concentration may be good, bad, or irrelevant for firm performance. This article reports two studies to shed further light on this puzzle. Study 1 uses 744 publicly listed large family firms in eight Asian countries (Hong Kong, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan, and Thailand) to test competing hypotheses on the impact of family ownership and control on firm performance. On a country-by-country basis, our findings support all three positions. On an aggregate, pooled sample basis, the results support the “irrelevant” position. Using 688 firms in the same eight countries, Study 2 endeavors to answer why Study 1 obtains different results for different countries. We theorize and document that Study 1 findings may be systematically associated with the level of (minority) shareholder protection afforded by legal and regulatory institutions. Study 2 thus provides critical insights on a cross-country, institution-based theory of corporate governance.

From diversification premium to diversification discount during institutional transitions

Recent development of an institution-based theory of corporate diversification has uncovered a diversification premium in emerging economies, suggesting that some business group-affiliated companies may outperform competing firms not affiliated with business groups. Is the diversification premium found in emerging economies likely to hold over time? This article extends the institution-based theory by arguing that as institutional transitions unfold, diversification premium in emerging economies is likely to dissipate over time and eventually become a diversification discount. We empirically draw on a data set from South Korea between 1984 and 1996 involving 84 business groups and 751 group-affiliated and independent firms to substantiate this claim via a “chop shop” method. To the best of our knowledge, this represents the first study that documents the longitudinal process of how a diversification premium becomes a diversification discount during institutional transitions.

Family Ownership and Control in Large Firms: The Good, the Bad, the Irrelevant - and Why

There is a major debate regarding the role of concentrated family ownership and control in large firms, with three positions suggesting that such concentration is (1) good, (2) bad, or (3) irrelevant for firm performance. This article reports two studies to shed further light on this debate. Study 1 uses 744 publicly listed large firms in eight Asian countries to test competing hypotheses on the impact of the combination of family ownership and control on firm performance. On a country-by-country basis, our findings support all three positions. On an aggregate, pooled sample basis, the results support the irrelevant position. Study 2, based on a sample of 688 firms from the same eight Asian countries, endeavors to answer why Study 1 obtains different results for different countries. We theorize and document that Study 1 findings may be systematically associated with the level of shareholder protection embodied in legal and regulatory institutions. Study 2 thus sketches the contours of a cross-country, institution-based theory of corporate governance. Overall, our two studies lead to a finer-grained and more cumulative understanding of the crucial debate on family ownership and control in large firms.

What Determines the Scope of the Firm Over Time? A Focus on Institutional Relatedness

“What determines the scope of the firm?” is one of the most fundamental questions in strategic management. We argue that, in addition to product relatedness, a focus on institutional relatedness—defined as an organization's informal linkages with dominant institutions that confer resources and legitimacy—helps answer this question. We address this question both longitudinally (firms in developed and emerging economies over time) and cross-sectionally (developed versus emerging economies), thus contributing to an institution-based theory of corporate diversification.

Is Trust Important in Technology Adoption? A Policy Capturing Approach

The study of trust in the context of technology adoption is one of initial trust formation. Due to the lack of complete information, an individual must make a ‘leap of faith’ when committing to the new technology. This leap of faith is trust. This study uses institution-based trust theory to link the characteristics of a new technology to the trusting stance of the potential adopter. This trusting stance is then linked to the technology adoption decision.The research model was tested using policy capturing. Policy capturing is a simulation-based decision modeling technique that allows the researcher to observe a simulation of actual decisions being made. The questionnaire was developed and administered to 181 undergraduate students. The results of this exploratory study suggest that trust is an important component in technology acceptance and adoption and that this construct should be incorporated into future research which focuses on technology adoption.