National distances,international experience,and venture capital investment performance

This study examines how the performance of cross-border venture capital investments is affected by national institutional and cultural distances between the environments of venture capitalists (VCs) and investee ventures. We propose that institutional and cultural distances will decrease VCs' effectiveness in conducting venture capital activities and negatively affect investment performance in terms of exit success, and obtain supportive evidence while controlling for geographic distance. We further analyze how VCs can use their international experience to mitigate the negative consequences of national distances. We find that while broad international experience in diverse countries attenuates the deleterious effects of institutional distance in a significant way, it does not have a similar impact in attenuating the negative effects of cultural distance.     

From structural to transition effects: Institutional dynamism as a deterrent to long-term investments by MNEs

The effect of institutional change on foreign direct investment is often conceptualized through the lens of an improving or deteriorating level of institutional quality that alters transaction costs. However, in the context of comprehensive government intervention in the past decades, this perspective ignores the potential uncertainties and costs associated with the process of institutional change. We propose that institutional change causes structural changes in transaction costs as well as accompanying transition effects due to uncertainty and learning costs. The extent of such transition effects is linked to the process characteristics of institutional change, e.g., institutional dynamism. In this paper, we examine the effects of institutional dynamism on foreign direct investment in long-term capital commitments and hypothesize a negative relationship between institutional dynamism and FDI, and a moderating effect of institutional dynamism on the relationship between institutional quality and FDI. Using investment data by US MNEs aggregated on the host country level, we find support for our hypotheses with some qualifications. We derive implications for the middle-income trap discussion as well as the ongoing fast-paced transition towards a sustainable global economy that is bound to shift attention from differences in the level of institutional quality towards differences in transition processes.     

Positive and Negative Corporate Social Responsibility, Financial Leverage, and Idiosyncratic Risk

Existing research on the financial implications of corporate social responsibility (CSR) for firms has predominantly focused on positive aspects of CSR, overlooking that firms also undertake actions and initiatives that qualify as negative CSR. Moreover, studies in this area have not investigated how both positive and negative CSR affect the financial risk of firms. As such, in this research, the authors provide a framework linking both positive and negative CSR to idiosyncratic risk of firms. While investigating these relationships, the authors also analyze the moderating role of financial leverage of firms. Overall, analysis of secondary information for firms from multiple industries over the years 2000–2009 shows that CSR has a significant effect on the idiosyncratic risk of firms, with positive CSR reducing risk and negative CSR increasing it. Results also show that the reduction in risk from positive CSR is not guaranteed, with firms having high levels of financial leverage witnessing lower idiosyncratic risk reduction.     

Institutional environment and Business Groups' resilience in Brazil

This article combines the institutional theory and political economy approaches to test hypotheses about how transitions in institutional environments affect the performance of Business Groups. Its primary hypothesis is that the different types of political connections established by Business Groups have moderating effects on this relationship. A sample of 1709 observations, from 317 distinct groups operating in Brazil between 2001 and 2009, was used in unobserved effects panel data models, which included the moderating effects of political connections. Our findings suggest that the institutional environment significantly affects Business Groups' performance and that this effect is moderated by political connections, when assessed in terms of the local or federal government as a minor shareholder of the Business Group. The moderating effects of political connections assessed through campaign donations were not conclusive.     

How and when does co-production facilitate eco-innovation in international buyer-supplier relationships? The role of environmental innovation ambidexterity and institutional pressures

Eco-innovation is an important element of a firm's environmental sustainability strategy and provides both competitive and environmental benefits, resulting in a win-win solution. Although previous studies have examined the influence of co-production on innovation, little is known about how and when co-production affects eco-innovation in the context of international buyer-seller relationships. Building upon the resource-based view, the dynamic capability perspective, and institutional theory, this study develops a conceptual model focusing on the effects of co-production on eco-innovation, the mediating effects of environmental innovation ambidexterity, and the moderating role of institutional pressures. The research was carried out using a survey-based quantitative study and the proposed hypotheses were tested using the hierarchical regression analysis. The results of a survey of 124 OEM suppliers in Taiwan show that co-production has a positive effect on environmental innovation ambidexterity. Our findings also show that the direct relationship between co-production and environmental innovation ambidexterity is stronger when institutional pressures are high as opposed to when they are low and that environmental innovation ambidexterity mediates the relationship between co-production and eco-innovation. This study contributes to a theoretical understanding of why some firms develop more environmental innovation ambidexterity than others, by analyzing co-production as a predictor and institutional pressures as a moderator. We discuss the theoretical and managerial implications of our findings.     

NGOs’ influence on MNEs’ social development strategies in varying institutional contexts: A transaction cost perspective

In this paper, we examine the effect of nongovernmental organizations (NGOs) on the transaction costs multinational enterprises (MNEs) assume in their nonmarket social development strategies. We develop propositions to predict the effect of three important aspects of the institutional context on how NGOs affect MNE transaction costs: institutional development, institutional distance and institutional dynamism. We also propose how these relationships are moderated by the level of civil society development in the countries in which these entities interact. We conclude with suggestions for further research.     

The impact of formal and informal institutional distances on MNE corporate social performance

Can host country selection affect the corporate social performance (CSP) of multinational enterprises (MNEs)? Using institutional distance as our theoretical lens, we propose and empirically examine the notion that greater institutional diversity can have disparate influences on the social performance of different types of MNEs. We conceptualize each MNE as a unique portfolio of locations and use that “footprint” to examine the impact of formal and informal institutional distances on CSP. We hypothesize and find (1) a moderating influence of greater formal institutional distance in the MNE portfolio that slows the rate of increased benefits associated with greater international scope; and (2) a direct influence of greater informal institutional distance that lowers the overall levels of CSP independent of the international scope of the MNE. Managerial implications for international location selection are discussed.     

Entrepreneurial Orientation,Managerial Networking,and New Venture Performance in China

Based on institutional theory, this study investigates the moderating effects of different types of managerial networking (political networking, financial networking, and business networking) on the relationship between entrepreneurial orientation (EO) and new venture performance in China. The study finds that political networking has a negative moderating effect on the positive relationship between EO and new venture performance, financial networking has an inverse U‐shaped impact, and business networking has a positive effect. The findings not only enrich our understanding of the impact of managerial networking on the performance implication of EO in new ventures, but also offer new ventures some guidance on how to use EO and different types of managerial networking to enhance performance in China's transition economy.     

Out of Africa: The role of institutional distance and host-home colonial tie in South African Firms’ post-acquisition performance in developed economies

The colonial ties and institutional distance affect the cross-border acquisition performance of internationalizing South African firms who acquire targets in developed economies. Along with these main effects, this paper examines the moderating effect of the colonial tie on the effects of institutional distance on post-acquisition long-term operating performance. Using data on South African acquisitions in developed economies, this study finds that the colonial tie has a negative impact on the long-term operating performance of South African acquirers. Yet, the colonial tie also moderates the effects of institutional distance. This work contributes to the discussion on host-home country institutional distance and its impact on post-acquisition long-term operating performance and how colonial past can influence the performance of acquirers from South Africa and other such countries with colonial history.     

Gender discrimination and lending to women: The moderating effect of an international founder

Much of the microfinance rhetoric revolves around fighting female poverty, which is often the result of discriminatory gender norms. Also, the microfinance industry has always been influenced by foreign actors, who, according to the literature, promote women’s empowerment. Yet, little is known about how microfinance institutions’ (MFIs) outreach to women is affected by the interplay between societal norms and the actions of these foreign actors. In response, this study draws on two streams of institutional theory, institutional logics perspective and institutional work theory, to investigate the influence of gender discrimination on microfinance outreach to women and to test the moderating effect of an international founder. Using data on 213 MFIs from 65 countries, the results show that gender discrimination negatively impacts microfinance outreach to women, but that the negative effect is mitigated by having an international founder. These findings are discussed, and several avenues are opened for future research.     

Cultural bridging and the performance of international joint ventures

The existing predictions and findings regarding the effect of cultural distance on the performance of international joint ventures (IJVs) remain inconsistent. We suggest that this inconsistency is due to the lack of conceptually differentiating the cultural distance between the firm’s home country and its partner(s)’country (home-partner country cultural distance) from the cultural distance between the firm’s home country and the location of the IJV (home-host cultural distance). We contribute to our understanding of IJVs by explicitly differentiating these two types of cultural distance, and by introducing the concept of cultural bridging. Cultural bridging relates to the proportion of home-host cultural distance that is compensated by having a joint venture partner, whose home country culture is more similar to the host country culture than the MNE’s home country culture is to the host country culture. We theorize how cultural bridging affects IJV performance and how it interacts with home-partner country cultural distance and home-host cultural distance to influence IJV performance. We test our hypotheses using a sample of 1708 IJVs. We find that cultural bridging has a positive influence on IJV performance, strengthens the positive performance effect of home-host cultural distance, and reduces the negative performance effect of home-partner country cultural distance. Our findings help make sense of some of the inconsistent findings regarding the role that cultural distance plays for IJV performance.     

Home country institutional environments and foreign expansion of emerging market firms

We propose that home country institutional environment shapes emerging market firms’ foreign expansion. We argue that better-developed home country institutional environment promotes emerging market firms’ expansion to foreign markets more advanced than the home country, while institutional instability in the home country reduces this propensity. We further hypothesize that the effects of home country institutional environment are contingent on firm-specific government ownership. Data on the foreign expansion of 921 Chinese firms in the period of 1996–2000 provide strong support for the effects of home country's institutional development and institutional instability. We also find that a high degree of government ownership weakens the positive effect of home country's institutional development on emerging market firms’ propensity to expansion to more advanced markets.     

Information direction, website reputation and eWOM effect: A moderating role of product type

This article examines how the electronic word of mouth (eWOM) information direction (positive vs. negative) and a website's reputation (established vs. unestablished) contribute to the eWOM effect. The article describes a study focusing on the moderating role of the product type (search vs. experience). The results of the experiment show that the eWOM effect is greater for negative eWOM than for positive eWOM, greater for established websites than for unestablished websites, and greater for experience goods than for search goods. The results support the moderating effects of product type on the eWOM information direction-website reputation-eWOM effect relationship. The impact of negative eWOM on the eWOM effect is greater for experience goods than for search goods. Similarly, the impact of website reputation on the eWOM effect is greater for experience goods than for search goods. The findings provide managerial implications for an Internet marketing strategy.     

When does FDI matter? The roles of local institutions and ethnic origins of FDI

How foreign direct investment (FDI) affects a host environment is a much discussed yet less understood topic of salience for international business managers, policy makers and researchers. Using panel data from 287 Chinese cities over the period 1999–2005, our study assesses (1) the multiple impacts of FDI in both positive and negative domains, (2) the role of local institutional development in moderating these impacts, and (3) whether the moderating effects of institutions differ depending upon the origins of the incoming investment (ethnic- versus non-ethnic-linked). Our analysis shows that indeed, FDI is a double-edged sword: it enhances the host city's economic growth, labor productivity and innovation but it also causes employment reduction and pollution in host cities. Moreover, the host city's institutional development is found to enhance the positive impacts of FDI and reduce its negative ones. Interestingly, the moderating effect is smaller for ethnic-linked FDI than for non-ethnic-linked FDI. As the first comprehensive attempt to unravel the role of institutional development in moderating the ambiguous impacts of FDI in multiple domains, this study confirms that a host's ability to absorb the benefits of FDI while curtailing its associated costs is both plausible and pivotal. As our world becomes flatter and FDI more entrenched in a host's economic and social development, this study provides important implications.     

Institutional development and firm profitability in transition economies

Although transition economies experience significant institutional transformations that vary in their pace and magnitude, our understanding of how such changes influence firm performance is rather limited. We examine how variations in institutional reforms and international openness in 16 transition economies in Central and Eastern Europe (CEE) influence firm profitability. We enhance the understanding of this subject by showing that such institutional changes have different effects on the competitive advantages and in turn profitability of domestic firms and foreign subsidiaries. Our analysis of over 230,000 observations reveals that institutional reforms benefit domestic firms. Conversely, a completely different pattern emerges for foreign subsidiaries, indicating that institutional reforms have negative consequences for their profitability. Hence, in contrast to the established assumption that developed institutional environments are advantageous for foreign subsidiaries, the nature of institutional changes makes domestic firms the main beneficiaries.     

Small firms’ non-market strategies in response to dysfunctional institutional settings of emerging markets

Institutional settings in emerging markets are often plagued by state actors exploiting the vulnerability of resource-constrained small and medium sized enterprises (SMEs). Whilst we know a great deal about how large firms use non-market strategies (NMS) to navigate such institutional spaces, current knowledge of such strategies in connection with SMEs remains limited. Using in-depth interview data from a wide range of actors in Russia, we reveal the predatory behavior of state actors and how, in response, SMEs develop NMS to respond to fluctuating institutional conditions. We underline four forms of institutional predatory behaviors comprising shifting the rules of the game; privatizing power; selectively using/abusing laws; and normalizing informalities. In turn, we identify how SMEs variously adopt NMS to tackle these predatory strategies; namely deflection, alliance, concealment and internationalization. We highlight how SMEs learn to navigate, and ultimately to overcome, dysfunctional and fragile institutional conditions of emerging markets through the pursuit of particular NMS.     

How institutional logics shape fairness in crowdsourcing: The case of Threadless

Fairness is essential for successful crowdsourcing. Without it, companies run the risk of consumers not participating, or worse, sabotaging the crowdsourcing initiative. Yet little is known about how consumers determine what is fair in crowdsourcing. Building on theories of organizational justice and institutional logics, and using a longitudinal netnography of Threadless, a popular crowdsourcing platform, this paper shows how experiences of fairness stem from the interaction between two conflicting crowdsourcing logics: the logic of renewal and the logic of community. The two logics inform notions of fairness in crowdsourcing contests across procedural, distributive, and interactional justice dimensions. A balance between the two logics is ideal for maintaining fairness among a crowdsourcing community. We show the conditions in which crowdsourcing participants tolerate transgressions to each justice dimension, consequently emphasizing one logic over the other. Overall, our study advances theory on crowdsourcing logics and how they guide notions of procedural, distributive, and interactional fairness in crowdsourcing. Our study also offers new guidance on how to manage fairness in crowdsourcing.     

Performance feedback and export intensity of Chinese private firms: Moderating roles of institution-related factors

Building on the behavioral theory of the firm and institutional view, we examine how performance feedback (i.e., a focal firm’s performance relative to its industry peers) affects export intensity and how institution-related factors moderate this relationship. Using a sample of Chinese private manufacturing firms, we find that positive performance feedback lowers export intensity while the relationship between negative performance feedback and export intensity is insignificant. Moreover, outperforming firms are likely to decrease their export intensity even more when they are located in regions of better institutional development or have political connections. Underperforming firms with political connections tend to increase their export intensity. These findings enrich our understanding of the export behavior of emerging market firms.     

Business under adverse home country institutions: The case of international sanctions against Myanmar

We expand the institutional perspective of international business by exploring the range of institutions outside the host country that influence international business. We use a critical case, Myanmar, to explore the dynamics of institutional constraints and the reaction of business to such constraints. Our in-depth case analysis focuses on four industries for the period 1996–2011. On this basis, we develop the concept of ‘low profile strategy’ and propose a conceptual framework of home country pressures influencing multinational enterprises’ international operation, and the variation of their impact across industries and firms. This framework provides a foundation for future work on the extra-territorial effects of institutions in international business.     

Exploring the relationship between institutional factors and FDI attractiveness: A meta-analytic review

This meta-analysis attempts to synthesize and review decades of research on the relationship between institutional factors and host country foreign direct investment (FDI) attractiveness. Using prior tests derived from 97 primary studies, we find support for prior theoretical predictions that institutional factors such as political stability, democracy, and rule of law attract FDI, while others such as corruption, tax rates and cultural distance deter it. Further evidence suggests a need for exploration of moderating factors that may influence previous key findings. Specifically, environmental effects such as level of development, region of destination, and competitive industry environment have varying influence on the strength and significance of the relationship. We also explore a number of methodological and economic moderating variables, providing additional interesting insights into previous empirical analyses. We conclude with suggestions for future research that stress a call for further contextualization of the relationship.