Does religion influence location choice in the hotel industry?

Relying on data from the Spanish hotel industry, this paper analyzes the role of informal institutional factors (IIF) in location choice. Earlier studies mostly use an aggregate level of cultural differences as informal institutional factors. We, however, go deeper into this concept and study the impact of two distinct but interrelated informal institutional factors, religion and language, on the location decisions of hotel chains. We resolve the overlapping problem between these two highly correlated IIF by means of a ‘layer’ measurement in Confirmatory Factor Analysis. Our results show that the higher the informal institutional differences (IID), the lower the presence of the hotels in the foreign country. While physical distance plays a key moderating role, formal institutional differences (FID) did not show any effect. We contribute by unravelling the role of language and religion in location choice in the internationalization process of service firms. Moreover, we test the moderating role of formal institutions in these decisions, thus combining the impact of formal and informal institutions on location choices in service firms.     

A double-edged sword? The antipodal effects of institutional distance on partner selection in cross-border alliances

Careful partner selection is a prerequisite for successful alliances. I posit that institutional distance will influence partner selection in international technological alliances negatively for exploitation, and positively for exploration alliances. A longitudinal dataset of firms in the global tire industry confirms firms’ preference for similar cognitive, normative, and regulatory partners in exploitation alliances, and a preference for dissimilar partners in exploration alliances. However, the latter is true for differences across the regulative and cognitive pillars rather than for normative differences. These findings attest to the antipodal role of institutional differences in the selection of prospective partners for cross-border technological alliances.     

Board experience and value creation in cross-border acquisitions: The role of acquirer and target country institutions

Our study investigates the effects of board acquisition experience on value creation in cross-border acquisitions and the dependence of this relationship on acquirer and target country institutions. We draw on cross-border acquisition research and institution-based corporate governance research to argue that the effect of board acquisition experience depends on the institutional characteristics of the acquirer and target countries and on cultural differences between these two countries. Based on 1775 cross-border acquisitions of U.S. and European acquirers, we show a positive effect of board acquisition experience on the announcement returns of cross-border acquisitions, which is even stronger when the target country’s takeover regulations are less friendly and when the target and acquirer countries are culturally more distant.     

Resources,home institutional context and SMEs’ exporting: Direct relationships and contingency effects

Research highlights the role of resources in SMEs’ exporting but is less forthcoming with respect to entrepreneurial perceptions of home institutional quality. Drawing on institution-based lenses, we distinguish among formal, informal, and regulatory institutions, which in concert with firm resources are expected to influence SMEs’ export behavior. Our predictions are tested on a sample of 150 firms located in Greece. The analysis of direct relationships shows that formal and informal institutional dimensions affect significantly, but differently, SMEs’ export activity. The analysis of interaction effects demonstrates that resource decisions for exporting are contingent upon entrepreneurial perceptions of the home institutional context, such that SMEs respond to formal and informal domestic institutional weaknesses by intensifying resource allocations to fuel export sales. In an opposite direction, export regulatory complexity reverses the positive resources-exporting link. These findings suggest the importance of home institutions in the exporting field.     

India's Informal Trade with Bangladesh: A Qualitative Assessment

The large and vibrant informal trade between India, and Bangladesh continues to thrive despite unilateral/regional/multilateral trade liberalisation in these two countries. This calls for an in-depth analysis of India's informal trade with Bangladesh. Using insights from the New Institutional Economics informal and formal institutions engaged in cross-border trade are contrasted to examine whether informal trading arrangements provide better institutional solutions. The analysis, carried out on the basis of an extensive survey conducted in India and Bangladesh reveals that informal traders in India and Bangladesh have developed efficient mechanisms for contract enforcement, information flows, risk sharing and risk mitigation. Further, informal traders prefer to trade through the informal channel because the transaction costs of trading in the informal channel are significantly lower than the formal channel implying that informal trade takes place due to the inefficient institutional set up in the formal channel. The principal policy implication from the study is that unless the transacting environment of formal traders improves, informal trade will continue to coexist with formal trade, even if free trade is established in the SAARC region.     

A cross-national investigation of IPO activity: The role of formal institutions and national culture

Why does IPO activity vary across countries? This study proposes that the variation is attributable to differences in the overall quality of formal institutions and in the informal institutional effects of national culture directly and interactively. The empirical analysis of IPO activity in 45 countries from 2001 to 2011 indicates that the quality of formal institutions and high levels of performance orientation each have positive effects on the level of IPO activity. Further, the positive relationship between the quality of formal institutions and IPO activity is amplified in cultures that encourage and reward performance achievement (high performance orientation) and those that favor the use of rules, and laws to enhance the predictability of future events (high uncertainty avoidance). This study provides theoretical and practical implications for understanding what motivates IPO activity around the world.     

Under what institutional conditions does overseas business knowledge contribute to firm performance?

We examine the extent to which the impact of the overseas business knowledge transferred by returnee entrepreneurs on firm performance is conditional on institutional factors. The findings show that informal institutional differences between the home and host countries strengthen the positive impact of overseas business knowledge on the performance of returnee-founded firms. There is a complementarity between informal institutional differences and local government policy support which jointly enhance the positive impact of overseas business knowledge. However, a well-developed local business infrastructure substitutes for the impact of informal institutional differences on the relationship between overseas business knowledge and returnee venture performance.     

The effects of institutional development and national culture on cross-national differences in corporate reputation

Corporate reputation is becoming more important to managers and scholars around the world. However, little is known about how much or why reputation differs across countries. We use institutional theory to fill this gap. We focus on institutional development, reflecting the expansion of formal institutions, and national culture, an important informal institution. We find that reputation is negatively related to institutional development and masculinity and positively related to power distance in a sample of 401 corporations from 25 countries. We recommend that institutional theory complement signaling theory in cross-national studies of corporate reputation.     

The effect of institutional quality on firm export performance in emerging economies: a contingency model of firm age and size

It is widely accepted that countries with sound formal and informal institutions create more robust environments for firm performance. However, due to the liabilities faced by firms without available slack and/or market power, we contend that institutions are especially important for new and small firms. Unfortunately, there is little research examining the potential moderating effect of firm size or age on the relationship between institutional quality and export performance. In response, we hypothesize that institutional quality will be more important to increasing the export performance of new and small firms compared with their large, established counterparts. We test our hypotheses using data from the World Bank’s World Business Environment Survey. The results of our analyses offer support for our model, although some institutional variables appear to be more important to export performance than others. We conclude by discussing the implications of our results.     

Regional social capital and moral hazard in crowdfunding

We contribute to institutional and social capital theory by developing a theoretical framework that suggests that informal and formal institutions are important in mitigating moral hazard in reward-based crowdfunding. We analyze a large sample of Kickstarter campaigns to test these predictions. We find a strong positive relationship between entrepreneurs' home-county social capital and their crowdfunding performance. A rule change that strengthens entrepreneurs' obligation to provide backers with the promised rewards is associated with a reduction in the effect of social capital, suggesting that formal institutions can substitute for informal ones and provides causal evidence of the effect of social capital.     

Emerging economies and institutional quality: Assessing the differential effects of institutional distances on ownership strategy

The current study contributes to the institution-based view of internationalization that is contingent upon the home country development. We examine the differential effects of formal and informal institutions on emerging market multinational corporations’ (EMNCs) ownership strategies. Facing a large informal institutional distance that represents diverse cultural beliefs, EMNCs opt for a low ownership position that alleviates legitimacy threat, whereas a large formal institutional distance leads EMNCs to establish dominant ownership control. EMNC home market conditions, including market size and regulatory institutional quality, further explain the differential effects of institutional distances.     

The three faces of China: Strategic alliance partner selection in three ethnic Chinese economies

It is generally understood that firm strategy is linked to both internal firm resources and external, competitive industry forces. More recently, studies have suggested that firm strategy is also influenced by the formal and informal institutions of the institutional environment. Culture and commercial conventions represent important informal institutions – the norms and values shared by a group of individuals – whereas more formal institutions include the regulatory, economic, and political forces in the environment. We explore the effects of formal and informal institutions on strategic alliance partner preferences in Mainland China, Taiwan, and Hong Kong. Although the three share a broad lineage, their institutional development differs in some respects. Utilizing a policy capturing study, we explore alliance preferences of senior managers from each of the three economies to demonstrate how similarities and differences in the institutional environment can produce variation in alliance partner preferences. This paper contributes empirically by comparing alliance partner preferences in three different ethnic Chinese communities in East Asia. We add to the nascent but growing literature on institutions and strategy, with practical implications for understanding alliance partner preferences of managers in China, Taiwan, and Hong Kong, which represent major centers of strategic alliance activity.     

Informal payments by patients for health services: prevalence and determinants

ABSTRACT

The aim of this paper is to explain the prevalence of informal payments in the health services sector in Southern Europe using the lens of institutional theory. To evaluate whether informal payments prevail due to formal institutional failures which lead to an asymmetry between the laws and regulations (formal institutions) and the unwritten rules (informal institutions), an analysis is undertaken of 2013 Eurobarometer survey data on the propensity to make informal payments by patients in Southern Europe. A strong association is found between the extent to which formal and informal institutions are unaligned, and the prevalence of informal payments, and such payments are found to be more likely when there is a lack of modernisation of governance coupled with a low range and reach of health services provision, lower health outcomes and systems focus on curative rather than preventative health services. The theoretical and policy implications are then explored.     

The double-edged sword of legitimacy in base-of-the-pyramid markets

As compared to developed countries, a much higher proportion of entrepreneurs within base-of-the-pyramid (BOP) markets operate unregistered businesses. Prior research has suggested that the primary cause of such informal activity in these settings is the general failure of ‘weak’ institutions to provide sufficient resources to warrant formalization. We attempt to extend such thinking by deconstructing the discrete and inter-related effects of formal business registration on the level of resources obtained by entrepreneurs from financial, labor, and legal institutions within BOP markets. Using a multi-method approach involving 299 entrepreneurs within Guatemala City, our results suggest that being seen as a ‘legitimate’, registered business can actually lead to both increased resource provision and resource appropriation. More specifically, adhering to the norms and rules prescribed by regulatory institutions within weak legal environments can convey positive signals of stability and profitability that both attract the desired attention from formal institutional actors, as well as unwanted attention from criminals.     

The characteristics of intellectual property rights regimes: How formal and informal institutions affect outward FDI location

This study examines the institutional arrangements that define the characteristics of national legal systems that are used to protect intellectual property (IP) assets embedded in outward FDI. The focus of the study is on how the institutional underpinnings of IPR regimes affect the costs and risk of using legal arenas to enable effective use of IP assets. Following a property rights approach it is postulated that formal and informal institutional arrangements influence how IP regimes affect the transaction costs and risk associated with converting ownership rights over IP into economic rights. Informal institutions are considered to affect the behaviour of agents involved in enforcing legal rights. This behaviour influences how IP law is implemented in legal arenas and thereby impacts on the efficacy of IPR regimes to help secure economic rights from the use of IP assets. Using data on outward FDI from the USA to 42 host countries the results find that the strength of informal institutions connected to the enforcement of IP in a country directly affects outcomes and positively moderates the effect of formal legal aspects of IP law on FDI flows. The results highlight the importance of informal institutional aspects connected to the behaviour of enforcement agents when using national legal systems to protect IP rights in cross-frontier transactions.     

Entrepreneurs' responses to semi-formal illegitimate institutional arrangements

While prior research has discussed how entrepreneurs deal with formal institutional voids and informal institutional environments, little is known about how entrepreneurs respond to institutional arrangements involving illegitimate actors. We define such arrangements as semi-formal illegitimate institutions. Using an exploratory study, we examine one such arrangement in Guatemala City, where organized crime dominates the institutional landscape in which entrepreneurs operate. We examine the strategic responses of these entrepreneurs, and find that they vary in the extent to which they resist semi-formal illegitimate institutions; some entrepreneurs engage in defiance, others avoid the illegitimate pressures, while others simply acquiesce. Upon further investigation, we find that the differences in entrepreneurs' network strength and network proximity, combined with their individual perception of threat and resource mobility, help to predict the different strategic responses.     

International retailer performance: Disentangling the interplay between rule of law and culture

Understanding the complexity of institutional factors in host countries and adapting strategies accordingly is crucial for international retailers, given the high failure rate of global operations. This paper investigates the impact of formal institutions (i.e., legal environments) and informal institutions (i.e., cultural values) on the performance of international retailers. We analyzed the data on 144 international retailers and 565 subsidiaries owned by these retailers, using three measures of retailer performance: sales per square meter, return on equity, and Tobin's Q. Our findings show that retailer performance is influenced by the interactions of the host country's rule of law and three cultural dimensions. Specifically, strong rule of law enhances the performance of international retailers in host countries, especially with high power distance or high uncertainty avoidance. In highly collectivistic countries, retailers can also build strong relationships to govern transactions. Results provide key insights that explain international retailers’ performance in different countries and deliver guidelines for retailer strategies.     

Institutional investors and cross-border mergers and acquisitions: The 2000–2018 period

Using a sample of mergers and acquisitions (M&As) from 26 countries over 2000–2018, we find that domestic institutional investors facilitate both domestic and cross-border M&As. The facilitation effect is more pronounced for domestic than cross-border M&As. When the acquirer country has greater financial freedom or better investor protection than the target country, domestic institutional investors facilitate cross-border M&As more effectively. As Ordinary Least Squares regressions are not the best approach regarding cross-border M&As, we confirm that the main results are robust to Zero-inflated Poisson regressions. Foreign institutional investors' influence on cross-border M&As is stronger when the sample excludes the United States.     

Governance and Performance of Strategic Alliances in Africa: The Role of Institutions

ABSTRACT

This article seeks to contribute to the institutional perspective of the governance of strategic intercompany alliances in Africa, through examination and analysis of a typology of informal African institutions. We support the view that interactions in African institutions determine the pertinent choice of governance mechanisms for intercompany alliances. In African institutional environments, the success of strategic alliances is subject to differentiated interactions among the contract, institutional confidence, interpersonal confidence and inter-organizational confidence. In the area of strategic management, this article provides theoretical and managerial contributions to our understanding of the institutional approach to the governance of strategic business alliances in Africa.     

Regional Guanxi Culture and Entrepreneurs’ Action Logic: A Multilevel Analysis

At the beginning of the reform period, though informal institutions as a substitute for formal institutions efficiently promoted the development of private enterprises, it eroded and destroyed the authority and execution efficiency of formal institutions with guanxi behaviors and implicit rules. With the progress of marketization, how to restrain and guide the evolution of informal institutions is an unavoidable obstacle for the development of private enterprises— transforming their competitive strategy from “non-market” dominance to “market” dominance. Based on survey data of 2,628 private enterprises from 31 provinces in China, we establish a regional commercial culture index to empirically investigate the different influences of guanxi behavior between entrepreneurs of different ages and regional guanxi culture. The results show that, compared with entrepreneurs who started businesses in recent years, i.e., after the 1990s, those who started businesses during the 1970s and the 1980s are more dependent on guanxi behaviors. Meanwhile, the higher the level of education, the less an entrepreneur is likely to be dependent on guanxi behaviors. However, compared with the constraint of the degree of regional marketization, regional guanxi culture promotes entrepreneurs’ guanxi behaviors. Further research indicates that the more enterprises depart from regional guanxi culture, the stronger the ability to innovation. This study can not only enrich the institutional analysis of entrepreneurs’ guanxi behaviors, but also provide a theoretical foundation for further expansion and deepening of reform.