National Institutional Environments Research Articles

FDI motives and city location preferences in the automotive and commercial banking industries

PurposeCities remain an understudied unit of analysis for understanding the motives of multinational enterprises’ (MNE) foreign direct investment (FDI), with subnational locations in International Business (IB) research to date predominantly captured via the phenomenon of agglomeration. As regional integration projects, such as the European Union and to a lesser degree NAFTA, increasingly reduce the importance of national institutional environments, this paper argues regional and subnational levels become more important for studying MNE location choice. This paper aims to evaluate the explanatory contribution of regional and subnational levels of analysis to understanding MNE location choice.Design/methodology/approachA qualitative deductive bottom-up multiple-case study research design is adopted to study the city location choices and FDI motives of six automotive and six commercial banking companies. These purposefully sampled manufacturing and service MNEs have different home countries and regional orientations. Data on their foreign investments across the extended Triad of Europe, North America and Asia-Pacific were collected for the time period of 2000–2021.FindingsFindings suggest that different classes of city tend to attract specific types of FDI and that these patterns might vary across sectors and be influenced by the regional strategic orientations of MNEs. Industry-specific findings reveal the importance of related and support industries and partners in a city location for the automotive MNEs, while the commercial banks seek investment opportunities in cities that allow acquisition targets that have an attractive customer based and will improve their local market knowledge.Originality/valueThe findings provide evidence in support of MNEs in manufacturing and service industries perceiving the attractiveness of three city types in different ways across the Triad regions.

Conditional Information Asymmetries and Board/CEO Ties in Outsider CEO Successions

The role of directors in CEO succession events has evolved in recent decades with the emergence of the newly created CEO labor market. In this context, directors can potentially assist companies to identify prospective CEOs in the interests of investors or use their expanded role to serve their own and management’s interests. We explore this issue through examining the impact of professional director/CEO relationships in 1,136 outsider CEO successions over the past three decades, spanning a range of institutional environments in developed and developing markets and across a range of company accounting and market-based financial indicators. We find that these relationships can serve both investors’ and management’s interests subject to the specific approach taken to corporate governance in Anglo-American, European, and Asian national institutional environments. Effects also differ across accounting- and market-based measures of financial performance. These findings reflect a previously unexplored conditional theoretical relationship between information asymmetries that affects investors, boards and CEOs. In characterizing the conditional nature of this relationship, this paper makes a unique theoretical contribution to the CEO succession literature’s understanding of the role of information asymmetry and its effect on board/CEO ties in the CEO labor market.

Beyond the nation-state: Anchoring supranational institutions in international business research

In this paper, we broaden the conceptualization of institutions beyond the nation-state and develop the concept of an institutional triality that represents two national institutional environments and the supranational level. While much of international business (IB) research has focused on national institutions and the differences between them, little attention and theorizing has been dedicated to the supranational institutions that form an integral part of the global institutional ecosystem. First, we conduct an interdisciplinary bibliometric survey on supranational institutions and a qualitative review of the central publications. Second, we initiate theory building and conceptualize supranational institutions from an IB point of view, distinguish them from related IB concepts, and discuss the conceptual properties of supranational institutions that are most relevant for MNCs. Building on these distinctions and properties, we provide a conceptual framework for understanding supranational institutions in the institutional triality. Third, we provide avenues for IB research building on the delineations, the conceptual properties, and the conceptual framework.

Institutionally Bounded Identities: Digital Engineers and Dgital Creatives in Mobile Games

Through a comparative multiple case study of 55 firms in the mobile games industry in Japan and the United States of America, we examine how new firms in new industries in different national institutional contexts develop their organizational identity. Our analysis suggests that national institutions act as an important filter through which new firms develop their organizational identity by sifting the influence of founders’ characteristics and motivations, on the one hand, and the industry technology and knowledge base, on the other. We show that these influences result in two distinctive types of organizational identity— “digital engineers” and “digital creatives”—that are closely associated with the different national institutional environments. The organizational identity of digital engineers emphasizes quality, consistency, and speed, whereas that of digital creatives emphasizes novelty, experimentation, and data analytics. New firms in new industries adopt strategic decisions that reflect and reinforce these identities, especially organizational actions regarding firm boundaries, human resources practices, and corporate development. We propose an emergent framework to explore how institutionally bounded organizational identities develop in a new digital industry.

The Impact of Intergovernmental Organizations on Entrepreneurship

Intergovernmental organizations (IGOs) aim to promote stability, development, and security for member states and their citizens via supranational institutional influences. However, their role and their impact on individuals has been questioned due to political, social, and economic uncertainties and the high detachment of the supranational IGO level and the individual level. For example, it is not clear how IGOs impact entrepreneurs and their strategic decisions to formalize entrepreneurial activities or remain informal. Thus, we study the impact of IGOs on entrepreneurial decision making, by considering the supranational institutional level, the national institutional ecology, and individual decision making. Through a study of 68 countries, their entrepreneurial environment, and their connection to IGOs, we find that IGOs generally cultivate a positive environment for entrepreneurship. Moreover, IGOs encourage different strategic decisions, i.e., encouraging formal entrepreneurship while discouraging informal entrepreneurship. We argue that a key mechanism of these impacts is the strength of the institutional ecology of member states and find that national institutional environments mediate the relationship between IGOs and entrepreneurship, further reducing informal and enhancing formal entrepreneurship. We combine international relations, institutional theory, and strategic entrepreneurship and interconnect supranational institutions, national institutional ecologies, and the individual’s entrepreneurial decision-making.

The effect of professional director/CEO relationships on the structure and composition of outsider CEO compensation: an international empirical examination

Directors are integral participants and stakeholders in outsider CEO succession events. This study examines the impact of professional director/CEO relationships in 1,173 outsider CEO successions on a range of fixed and short- and long-term, performance-related CEO compensation ratios. Results show that these relationships matter in determining the structure and composition of CEO compensation but that there are significant international differences, reflecting varying approaches to corporate governance, including board monitoring, in unique national institutional environments. Results also show that in the United States and other Anglo-Saxon capital markets, where institutional transparency is highly regarded, professional director/CEO relationships are associated with a restructuring of CEO compensation in favour of CEOs and against the interests of investors.

Performance differences between nations exploiting a common natural resource: The Icelandic–Norwegian mackerel case

The same type of industries, located in different nations, may perform differently in global markets. This comparative case study of the Icelandic and Norwegian mackerel industries explores whether national resources, capabilities, and institutional environments can help elucidate performance differences in exporting a common natural resource. To gain insight into the phenomenon, the present study utilizes landing and export statistics from the two nations supplemented with qualitative data based on interviews with key stakeholders in both nations. The findings show that Norway achieves a significantly higher export price on North East Atlantic mackerel than does Iceland. The price premium is consistent over time. Different qualities of the fish exported from the two countries are considered to be the main reason for the price contrast. The quality differential, as the present study argues, is primarily due to biological conditions, which neither of the two nations control, as the natural quality of the mackerel is highest when the fish is accessible in Norwegian waters. Accordingly, Norway has a biological competitive advantage over Iceland in terms of mackerel export. However, it is argued that Norway’s ability to exploit the advantage commercially may be related to national resources and capabilities but hardly to the Norwegian institutional framework, which does not allow firms to integrate vertically. Finally, in the paper, the findings are discussed, and implications are outlined.

Institutional characteristics and the development of crowdfunding across countries

The diffusion of crowdfunding among countries differs consistently, based, in part, on differences in national institutional environments. This study analyses the influence of formal and informal institutions in 27 different countries during the 2014–2017 period, on the development of crowdfunding. Our results show that the crowdfunding market – across all the different crowdfunding typologies- is larger in countries characterized by a business-friendly legal environment, and well-developed financial market in the case of lending crowdfunding. Individualistic societies register higher crowdfunding activity across the different typologies; lending crowdfunding is more widespread in countries characterized by higher uncertainty-avoidance and, together with equity crowdfunding, in long-term oriented societies.

Family Business Growth Around the World

Growth is important for the long-term success of a business. Regrettably, the impact of family influence on firm growth is largely neglected. We examine whether family firms have a higher growth rate than their nonfamily counterparts. Based on a large sample of firms across 43 countries over a 10-year period, we show that family firms on average have higher growth rates than nonfamily firms, and this positive effect is greater for family firms operating in strong national institutional environments which are less corrupt, more democratic, more subject to rule of law, and have effective government policies. We also find that the positive effect of family influence on firm growth varies significantly across different types of family firms and different business cycles. These findings show that family control has an economically significant impact on growth rates and important implications for both family firm theory and practice.

Greater fit and a greater gap

PurposeThe purpose of this paper is to understand how national institutional environments contribute to differences in life satisfaction between entrepreneurs and employees.Design/methodology/approachLeveraging person–environment fit and institutional theories and using a sample of more than 70,000 entrepreneurs and employees from 43 countries, the study investigates how the impact of entrepreneurial activity on life satisfaction differs in various environmental contexts. An entrepreneur’s life satisfaction arguably should increase when a high degree of compatibility or fit exists between his or her choice to be an entrepreneur and the informal and formal institutional environment.FindingsThe study finds that differences in life satisfaction between entrepreneurs and employees are larger in countries with high power distance, low uncertainty avoidance, extant entrepreneurship policies, low commercial profit taxes and low worker rights.Originality/valueThis study sheds new light on how entrepreneurial activity affects life satisfaction, contingent on the informal and formal institutions in a country that support entrepreneurship by its residents.

The influence of home-country institutions on servitization

PurposeThe purpose of this paper is to explore how home-country institutions influence firms’ servitization decisions. Existing studies have mostly neglected differences across countries and implicitly assumed the servitization process and drivers are homogenous across national institutional environments. The authors challenge this assumption.Design/methodology/approachUsing case-based research, the authors explored the influence of formal institutions of the product, financial and labor markets on the servitization of two firms operating in a developed country and two in an emerging country.FindingsThe absence of robust home-country institutions did not necessarily hinder the servitization process. On the contrary, firms servitizate to overcome the difficulties posed by these institutional voids. The flexibility associated with service offerings enables firms to create viable alternatives to cope with taxes, lack of infrastructure and qualified labor force.Originality/valueThese outcomes contribute to the servitization literature, which has mainly focused on single-country studies and takes for granted the institutional differences between countries. The findings suggest future studies need to consider how and, to what extent, the country where the company is located influences servitization strategies and processes. Such reflections will improve the inferences made concerning firms’ servitization. For practitioners, the results suggest that the move into the provision of services can be a fruitful strategy to overcome the difficulties faced in emerging markets.

Creating strategic couplings in global production networks: regional institutions and lead firm investment in the Humber region, UK

Abstract This article aims to unpack and analyse the institutional and political dynamics of strategic coupling from a host region perspective, adopting an actor-centred approach that focuses on regional institutions’ efforts to attract and embed lead firm investments within global production networks. We are particularly concerned with understanding the strategic agency and shifting coalitions of actors that create couplings and shape their evolution over time. This involves opening up the institutional underpinnings of strategic couplings by focusing more specifically on the key episodes in their creation and the organisation of the temporary coalitions that do the work of creating couplings. This approach is operationalised through a case study of the Siemens offshore wind turbine plant in the Humber region of England. In conclusion, we emphasise the need for regional institutions to develop adaptive coupling creation strategies that co-evolve with the reconfiguration of production networks and the reshaping of national institutional and political environments.

Exploring the interaction of firm-level change and national institutional environments in shaping employment and union relations: a comparative case study of four European airlines

Drawing on the example of the airline industry, this paper explores in a longitudinal comparative case study the question of how firm-level changes and national institutional environments interact in shaping employee and union relations. Adding to previous research in comparative institutional analysis and comparative employment relations, we illustrate that the way in which industry pressures and national-level effects play out to influence employee and union relations depends on firm-level changes, mainly in the form of firm growth, acquisitions and the foundation of new subsidiaries. We show in particular that depending on firm-level changes, the very same firm might engage differently with a given institutional context at different points in time. Hence, our work illustrates the importance of firm growth, acquisitions and the foundation of new subsidiaries in explaining the shifting interaction between the firm and its institutional environment, and its implications for changing employee and union relations within firms.

National Stakeholder Orientation, Corporate Social Responsibility, and Bank Loan Cost

Based on a sample of firms from 20 countries around the world, this study investigates how the relationship between corporate social responsibility (CSR) and bank loan pricing is affected by the degree of national stakeholder orientation. We find that firms with superior CSR performance are more likely to enjoy lower loan costs in more stakeholder-oriented countries than are their counterparts in less stakeholder-oriented countries. This study contributes to the CSR literature by highlighting the importance of national institutional environments in determining the economic consequences of CSR practices.

The Dynamics of the South Korean National Business System and the Changing Spirit of CSR

This study has two clear objectives: (1) to bring the dynamic view on national institutional frames (national business system), (2) to show the strong role of the informal dimension of the national institutions in understanding the local adoption and institutional change. With the South Korean case, I examined the way in which the public has perceived the business and society relation over the structural transformation of the national business system and how corporate social engagement practices have reflected such a shared understanding of the business and society relation over the changes of the national business system. In fact, the South Korean business system has drastically transformed over the 80 decades, even though scholars mostly recognize the South Korean business system as the state-led market economy based on a close collaboration between a few business clans (chaebols) and the nation-state from the economic development period (1970s-1980s). Based on interviews with the formal and current CSR managers and consultants and major news articles between 1920 and 2013, I analysed how South Koreans have perceived and expected the role of the wealthy, business actors, mainly chaebols in the history of the Korean business system towards the neo-liberal market transformation. This study argues that that comparative CSR scholars need to consider the “spirit of CSR” more actively in order to understand the varieties of CSR, and more theoretically that the dynamic view of national institutional environments and its informal dimension is important to understand institutional change.

Union Strategies, National Institutions and the Use of Temporary Labour in Italian and US Plants

AbstractThis article analyses variation in the use of temporary labour based on a comparison of two plants of the same US automotive multinational corporation, one in Italy and the other in the United States. We argue that differences in the use of temporary labour are explained by union capacities to make trade‐offs between alternative forms of flexibility as well as trade‐offs in the protection of internal and external groups of workers. Union capacity is dependent on the availability of power resources within different national institutional environments. These resources are shown to influence not only the ways in which temporary workers are used but also bargaining outcomes — including employment conditions — benefiting them.

Institutional influences on SME exporters under divergent transition paths: Comparative insights from Tajikistan and Kyrgyzstan

This paper compares the influence of national institutional environments on the internationalisation of SME exporters from two countries, Tajikistan and Kyrgyzstan, which followed divergent paths in the transition process. It contributes in several ways, notably by extending scholarly debate on divergent paths of transition to the IB literature, and enriching the institution-based view of IB with perspectives from the new institutional economics and comparative institutionalism and offering fresh evidence of how formal and informal institutions and the enforcement mechanism interact to create specific incentives and barriers for internationalising SMEs. The study, one of the first to examine SME exporters from the former Soviet Republics of Central Asia, cautions against the tendency to attribute countries in the transitional periphery with homogenous institutional environments. Analysis of case study evidence suggests appreciable differences in the institutional environments facing SME exporters in the comparator countries. More specifically, SME exporters in Tajikistan seem to experience tougher institutional constraints relative to their Kyrgyzstan counterparts, and this divergence in institutional environments appears to affect the internationalisation prospects and competitiveness of Tajikistan and Kyrgyzstan SME exporters adversely and favourably respectively. The above findings are richly illustrated in the paper, which also discusses implications for theory, managerial and policy decision making and future research.

Institutional Arrangements and the Morphology of Residential Development in the Netherlands, Flanders and North Rhine-Westphalia

This article aims to highlight the mechanisms through which institutional arrangements influence the morphology of residential development. By comparing the Netherlands, Flanders and North Rhine-Westphalia, which have quite similar socio-economic and landscape characteristics, it investigates how differences in national institutional environments have contributed to differences in the urban morphology of residential areas. This article fits within a broader institutional “turn” in planning research. While most of these studies focus on how institutions affect the behaviour of actors in the process of planning and development, this article focuses on the physical outcomes of these processes. The institutional analysis of physical outcomes suggests that urban morphology is not only linked to planning systems—the subject of this special issue—but also to housing cultures and property regimes.

The Embededness of Responsible Business Practice: National Institutional Environments and Corporate Social Responsibility

Academic literature recognizes that firms in different countries deal with Corporate Social Responsibility (CSR) in different ways. Because of this, analysts presume that variations in national institutional arrangements affect CSR practices. Literature however lacks specificity in determining, first, what parts of national political economic configurations actually affect CSR practices; second, the precise aspects of CSR affected by national-institutional variables; third, how causal mechanisms between national institutional framework variables and aspects of CSR practices work. Because of this the literature is not able to address to what extent CSR practices are affected by either global or national policies, discourses and economic pressures; and to what extent CSR evolves as either an alternative to or an extension of national institutional arrangements. This paper proposes an alternative approach that focuses on an exploration of links between disaggregated variables, which can then be the basis for imagining new national-institutional configurations affecting aspects of CSR.

Converging Divergence: the Diffusion of the Green State in Latin America

Global processes of policy diffusion result in different types of state development. A broad view of environmentalist reform in Latin America easily reads as top-down diffusion of blueprints and institutional convergence. But such a thesis is reductionist and ultimately misleading, case studies demonstrate. First, diffusion mechanisms matter for divergence: when normative and mimetic mechanisms are relatively strong vis-a-vis coercive forces, formal state change is followed by more meaningful real state change; when the coercive mechanism rules unmatched, green state change ends up being formal for the most part. Secondly, institutional entrepreneurs face shifting opportunity structures for political change; because these opportunities are never uniform, national experiences will differ. Thirdly, national institutional environments provide contrasting domestic resources and cultures for the building of green states; legacy, in short, will condition translation by entrepreneurs. A bridging institutionalist framework helps us make sense of “converging divergence”.