Session 209

Institutions and Emerging Markets

Track G

Date: Sunday, October 4, 2015

 

Time: 16:15 – 17:30

Paper

Room: Director's Row H


Session Chair:

  • Santiago Mingo, Adolfo Ibañez University

Title: An Institutional Voids Conundrum: Foreign Affiliates in an Emerging Market

Authors

  • Mayank Sewak, University of Massachusetts-Amherst
  • Anurag Sharma, University of Massachusetts-Amherst

Abstract: The institutional voids literature supports the superior performance of business group affiliates over non-group affiliates in emerging markets. We seek to extend this argument to the case of MNE affiliates operating in an emerging market. On a sample of multinational subsidiaries operating in India, we find that contrary to our theoretical expectation, group affiliated firms perform lower than non-group affiliated firms. We report this surprising finding in this paper and suggest avenues for future research to re-test and further explore the reasons why group affiliation has the opposite effect on foreign firms than on domestic firms as reported in previous literature.

Title: Institutional Change and Firm Upgrading Speed in Emerging Economies

Authors

  • Stephanie Wang, Indiana University

Abstract: In this paper, I propose an institutional ambidexterity framework to explain the dual effects of institutional change on firm-level upgrading speed. I argue that institutional change in an emerging market results in pro-market reforms and institutional frictions, thus providing both opportunities and restrictions for a firm to rapidly upgrade and catch up. Pro-market reforms facilitate upgrading speed by creating supporting incentive regimes and open factor markets. By contrast, institutional frictions impair the upgrading speed of the firm because conflicting rules and norms cause significant uncertainty to rapid organizational upgrading. Furthermore, I propose that improving the institutional ambidexterity of a firm is an effective strategy to strengthen the enabling effect of pro-market reforms and weaken the obstructing effect of institutional conflicts on firm upgrading speed. The findings from a sample of 674 large firms from 25 countries support the proposed hypotheses.

Title: Institutional Development, Family Control and Management, and Company Profitability

Authors

  • Luis Dau, Northeastern University
  • Saptarshi Purkayastha, Indian Institute of Management-Calcutta

Abstract: Building on agency theory and the literature on institutional voids, this research note studies the relationship between institutional development, family control, family management, and firm profitability in emerging markets. We propose that institutional development tends to be beneficial for emerging market firm profitability because of the improved market conditions and competitive forces that allow and compel local firms to enhance their internal functioning to remain competitive. Furthermore, we argue that this effect is greater for family controlled firms because their successful track record, reputation for stability, and accumulated social capital facilitates their survival and responsiveness during periods of institutional transition. However, we suggest that this effect is higher for family controlled firms that are professionally managed because institutional changes designed to curb malfeasance and opportunism can help align the interests of managers and owners. We test these arguments on a panel of 503 Indian firms for the years 2003-2012.

Title: Institutional Distance, Institutions in Destination Countries, and Cross-border Investments in Emerging Markets

Authors

  • Santiago Mingo, Adolfo Ibañez University
  • Francisco Morales, University of Colorado, Boulder

Abstract: The literature about the impact of formal institutions on cross-border investments has usually focused on either (a) institutional distance between countries or (b) institutional quality in the destination country. We introduce a new construct—institutional saliency—to integrate both perspectives in the context of cross-border investments in emerging markets. An emerging market is institutionally salient when it has strong institutions relative to other emerging markets. We argue that institutionally-salient countries particularly attract the attention of investors located in institutionally distant countries. The empirical analyses, based on a novel dataset covering more than 300 private equity (PE) firms that made close to 1,500 investment transactions in Latin America during 1996-2011, support our main theoretical arguments.

All Sessions in Track G...

Sun: 08:00 – 09:15
Session 32: Microfoundations of international strategic management: Opportunism, trust, and bounded reliability
Sun: 09:45 – 11:00
Session 279: Formal theory in strategy - A primer
Sun: 11:15 – 12:30
Session 33: Methodological challenges in publishing international strategy research
Sun: 16:15 – 17:30
Session 209: Institutions and Emerging Markets
Sun: 17:45 – 00:00
Session 315: Global Strategy Business Meeting
Mon: 08:00 – 09:15
Session 126: Entry Mode & Cross-Border Acquisitions
Mon: 11:15 – 12:30
Session 149: Management and Coordination of Multinationals
Mon: 13:45 – 15:00
Session 128: Emerging Markets
Mon: 16:45 – 18:00
Session 151: Networks and Collaborative Arrangements
Tue: 08:00 – 09:15
Session 129: Foreign Direct Investments
Tue: 11:00 – 12:15
Session 127: Institutional Context
Tue: 14:15 – 15:30
Session 266: Offshoring
Tue: 15:45 – 17:00
Session 130: International Diversification
Session 150: Location and Geography
Tue: 17:30 – 18:45
Session 208: Internationalization Strategies and Performance


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