Emerging Multinationals from Mid‐Range Economies: The Influence of Institutions and Factor Markets

This paper revisits and extends our earlier work (in 2005) in the pages of this journal. We argue that there is a need for more fine‐grained understanding of the country context along two dimensions: (1) institutional development and (2) infrastructure and factor market development. Specifically, we propose an enriched typology of emerging economies with a focus on mid‐range emerging economies, which are positioned between traditional emerging economies and newly developed economies. Then we examine new multinationals from these mid‐range emerging economies that have internationalized both regionally and globally. We outline directions for further research based on this typology in terms of (1) government influence, (2) resource orchestration, (3) market entry, and (4) corporate governance regarding the internationalization strategy of these emerging multinationals from mid‐range economies.     

Monitoring effect of transparency: How does government environmental disclosure facilitate corporate environmentalism?

Environmental information transparency is a key policy instrument in environmental governance, which has been emphasized in most of the literature. Although a large body of research has focused on its role at the national or industrial level in the developed countries, few studies have extended it to emerging economies and tested its role in the subnational context. In this paper, we have empirically examined how government environmental disclosure shapes corporate environmentalism in the context of China. It is argued that the information transparency of government environmental disclosure can promote corporate environmentalism by providing supports for governments' decision‐making of environmental governance, the activeness of environmental nongovernment organizations, and the participation of general public in environmental issues. Especially, we have highlighted two kinds of influences on focal relationship: booster role of bureaucratic capability in the diffusion of environmental institutional pressure and receiver role of organization slack and industrial competition in the perception of environmental institutional pressure. Using a panel dataset of Chinese publicly listed firms from 2008 to 2015, a positive relationship between government's environmental information transparency and corporate environmentalism is found. In addition, our result has shown that this relationship will be stronger for regions where government bureaucracy capabilities are stronger. This study contributes to understanding of the process of firms' strategic choice facing environmental and institutional changes in emerging economies.     

The Relevance of the Institutional Underpinnings of Porter's Five Forces Framework to Emerging Economies: An Epistemological Analysis

ABSTRACT Using the Toulmin method, we present an epistemological analysis of Porter's Five Forces Framework (FFF) in light of the increasing evidence pertaining to the institutional context in emerging economies. The analysis reveals three key qualifiers in the theoretical structure of FFF – transaction costs, capital flows and laws governing rivalry. Evidence from emerging economies indicates that FFF's assumptions about the qualifiers are not met in these economies. Indeed, firms in these economies adopt strategies not derivable from FFF to tackle their unique institutional contexts. Our Toulmin analysis helps pinpoint the directions for further research in emerging economies. Specifically, the three qualifiers provide a meaningful way of building typologies and taxonomies to accommodate the diversity of institutional contexts and to link them to firm-level strategies. Our discussion also highlights the need to turn the spotlight on laws governing rivalry, a relatively under-explored topic in emerging economies, and the effectiveness of different network strategies.     

Corporate Governance in Emerging Economies: A Review of the Principal–Principal Perspective

abstract    Instead of traditional principal–agent conflicts espoused in most research dealing with developed economies, principal–principal conflicts have been identified as a major concern of corporate governance in emerging economies. Principal–principal conflicts between controlling shareholders and minority shareholders result from concentrated ownership, extensive family ownership and control, business group structures, and weak legal protection of minority shareholders. Such principal–principal conflicts alter the dynamics of the corporate governance process and, in turn, require remedies different from those that deal with principal–agent conflicts. This article reviews and synthesizes recent research from strategy, finance, and economics on principal–principal conflicts with an emphasis on their institutional antecedents and organizational consequences. The resulting integration provides a foundation upon which future research can continue to build.     

Accounting in Transitional and Emerging Market Economies

The aim of this introduction is to discuss some of the challenges and problems faced by researchers who are interested in conducting research in transitional and emerging market economies and to highlight some of the key attributes and characteristics of these economies. The papers contained in this Special Section are introduced by way of providing a brief overview of their contributions and identifying other important areas that future researchers might wish to pursue.

This Special Section of European Accounting Review is devoted to publishing papers on various accounting issues in transitional and emerging market economies. In this introduction, we aim to set the scene for the papers contained in this Special Section, to highlight some of the key attributes and characteristics of transitional and emerging market economies, to provide a brief overview of the contributions published here and finally to identify some other important areas that future researchers might wish to pursue.     

Coevolution of Institutions and Corporations in Emerging Economies: How the Salim Group Morphed into an Institution of Suharto's Crony Regime

abstract We investigate whether large family groups in emerging economies can proactively change their environment. We use a coevolutionary approach, which accounts for the influence of context on the entrepreneur and for the freedom of the latter to modify it. We find that entrepreneurs can shape institutions to their advantage, illustrated by the Salim Group, which achieved growth by aligning with and influencing politicians, eventually ‘morphing into an institution’. We unravel unique coevolutionary patterns, which we use to extend existing theories. Our first contribution is to initiate a new line of inquiry in coevolution theory, focusing on individual companies coevolving with institutions. Secondly, we document factors that increase and decrease strategic choice for family groups in emerging economies. Thirdly, we find that the Salim Group became part of the crony Suharto regime. The group became both an institutional entrepreneur and an entrepreneurial institution, demonstrating that companies and institutions are not necessarily mutually exclusive.     

Four ‘domains’ of career success: how managers in Nigeria evaluate career outcomes

Using an exploratory qualitative approach based on in-depth interviews with 38 junior and middle managers, and informed by institutional theory, this article explores how Nigerian managers conceptualise career success. Results indicate that in contrast to some Western-based research, managers prioritise ‘objective’ (e.g. achieving financial stability) over ‘subjective’ (e.g. achieving work–life balance) career outcomes. Results also indicate that the well-applied dichotomy between objective and subjective measures is insufficient to capture the complexities and nuances observed in the Nigeria context. We thus propose four ‘domains’ of career success to include personal and relational dimensions in addition to the subjective/objective criteria. This we argue is a more comprehensive, integrative and contextually sensitive ‘frame’ for the analysis of career outcomes. Our findings suggest that scholars and multinational companies interested in expanding their operations to emerging economies need to incorporate these factors into their conceptualisations and management practices.     

Income diversification and bank risk in Asia Pacific

This paper investigates the effect of income diversification on bank risk for a large sample of commercial banks in 14 Asia Pacific economies over the period 2011–2016. Using a dynamic panel data model with a system generalized methodof moments estimator, we find that banks with a higher level of income diversification are less risky in general. We further consider both developed and emerging economies according to the International Monetary Fund's classification of the level of economic development. Specifically, for emerging economies, the results indicate that banks with a higher level of income diversification face less risk. However, the diversification of commercial bank income has no significant impact on bank risk in developed Asia Pacific economies.     

Institutional environment for entrepreneurship in rapidly emerging major economies: the case of Brazil,China, India,and Korea

The country institutional profile (CIP) construct has become the most widely used conceptualization of institutional environment for entrepreneurship. This construct is frequently employed to study institutional forces influencing entrepreneurial activity at the national level. However, relatively little is known about the cross-national equivalence of the construct. Moreover, the institutional environment for entrepreneurship in emerging economies remains largely under-explored. To address these issues, in the current study, we used the most frequently utilized CIP scale to collect data from 809 young adults in four rapidly emerging countries: Brazil, China, India, and South Korea. We examined the invariance of the CIP construct and unraveled differences in perceived institutional profiles among these rapidly emerging economies. Results support the CIP construct as largely invariant in the four REME countries and revealed important differences in specific aspects of institutional environments in these countries. Implications for future research and practice are discussed.     

Towards a Social Theory of Agency

We challenge critics of agency theory who suggest that agency theory's value does not extend outside a narrow context dominated by egocentric agents seeking only to maximize wealth at the expense of the principal. Instead, we argue that agency theory's flexibility allows for its application to a variety of non‐traditional settings where the key elements of agency theory, such as self‐interest, information asymmetry, and the mechanisms used to control agency costs can vary beyond the narrow assumptions implied in traditional agency‐based research. We suggest that extending agency theory to diverse settings using a deductive approach can be accomplished by formally recognizing and incorporating the institutional context surrounding principal–agent (P–A) relations into agency‐based models. Thus, criticisms that agency theory fails to acknowledge the social context in which P–A relations occur provides not a barrier but an opportunity for extending our understanding of P–A relations to a variety of diverse contexts.     

The determinants of venture creation time: a cross-country perspective

The purpose of this paper is to examine the impact of macro-institutional and macro-non-institutional factors on the new venture creation time across emerging as well as developed economies in Europe using panel data from 2003 to 2006 in 15 emerging and developed countries. This paper finds significant relationships between the venture start-up time and institutional factors that include lending interest rates, start-up procedures, and taxation and one non-institutional factor, GDP per capita. Additionally, we found differences in the factors between emerging and developed countries. Institutional factors, such as start-up procedures and trade opportunities, are important determinants of new venture creation time in emerging countries, consistent with the findings of recent studies. To encourage business formation, policy makers may need to revise policies concerning these factors which can facilitate or restrict new venture formation. Implications for further research and practice are discussed.     

Factors affecting corporate environmental disclosure in emerging markets: The role of corporate governance structures

This study seeks to examine whether internal corporate governance (CG) mechanisms affect corporate environmental disclosure (CED) in emerging economies. Using a sample of 500 firm-year observations, this study distinctively applies a linear panel quantile regression (PQR) model to examine the CG–CED nexus in Jordan. This technique is supplemented with conducting a two-step dynamic generalised method of moment (GMM) model to overcome any potential occurrence of endogeneity problems. This study reports an increasing trend in CED practice among the sampled companies over the period of analysis, yet it is still at an early stage as compared with their developed counterparts. Furthermore, this study suggests that board size, board independence, CEO duality and foreign ownership have positive associations with CED. In contrast, managerial ownership, institutional ownership and ownership concentration are negatively associated with the disclosed amount of environmental information in the Jordanian context. Theoretically, board structures appeared to be more efficient than ownership structures in reducing agency conflicts by addressing the asymmetric gap of information and promoting the disclosure of environmental information. These findings add to the debate about whether ownership structures detrimental to CED in developing economies. Specifically, when it comes to spending money on CED, owners seemed to be more concerned about any reductions in their share of the pie and may, therefore, be less motivated to disclose their companies' environmental information. This paper provides managers, owners and policymakers with a set of context-specific recommendations related to the crucial need for a more concerted effort to integrate governance and environmental regulations in order to ensure sustainability in emerging markets.     

Does entrepreneurial activity matter for economic growth in developing countries? The role of the institutional environment

The discussion on which institutions determine entrepreneurial activity – and the role of institutions in the aggregated output for developing countries – is as yet unresolved. The extant literature about entrepreneurship recognizes new ventures as potential mechanisms for long-term development. Yet, there is a consensus on the lack of evidence, particularly for these countries. Drawing on institutional economics, this article explores the interrelationships among institutional environment, entrepreneurial activity, and economic growth. To this end, we use simultaneous-equation panel data models for a sample of 14 developing countries (78 observations) over the period of 2004–2012. The main findings suggest a causal chain running from institutions to opportunity entrepreneurship, which is linked to the economic growth of emerging economies. In particular, we find that institutional factors – such as the number of procedures to start a new business, private credit coverage ,, and access to communication– influence entrepreneurial activity driven by opportunity. Policy implications for developing countries could be derived in order to enhance their economic performance through entrepreneurial activity.

     

Constructing an index for comparing human resources management sustainability in Europe

Assuming that a company's institutional context influences its sustainability approach and its human resources management (HRM), this article compares firms' sustainable HRM systems across countries. Despite the presence of a supranational government, different social models exist in Europe according to the level of social protection in each country. The article compares the engagement of companies with sustainable HRM across Europe and develops an index with which to compare HRM sustainability in countries that present significant institutional differences: Germany, Spain, Sweden, and the United Kingdom. The index is constructed based on a formative measurement model, which reflects the implementation levels of sustainable HRM in 106 western European firms. The index reveals significant differences between companies from the four countries and between liberal and coordinated market economies, indicating the need to address the impact of the national institutional context on firms' HRM sustainability.     

Ethnic homophily perceptions as an emergent IHRM challenge: evidence from firms operating in Sri Lanka during the ethnic conflict

Ethnic conflict is a defining characteristic of the post-Cold War era and is prevalent particularly in emerging economies, areas of increasing interest to multinational enterprises. Yet little is known about the international human resource management challenges arising from such societal context. Utilizing social identity theory, we propose that ethnic homophily perceptions in the workplace – an employee's assessment that colleagues prefer working with ethnically similar others – is a reflection of the societal context and can be detrimental to the organization if not managed appropriately. We investigate whether contact theory offers insights to manage such perceptions. Drawing on a sample of 550 managers in Sri Lanka during a period of protracted ethnic conflict, we found that employee sensitivity to ethnic conflict in the societal context is positively related to ethnic homophily perceptions in the workplace, and that both ethnic diversity in workgroups and quality of work relationships serve to reduce perceptions of ethnic homophily.     

Corporate environmental responsibility,employer reputation and employee commitment: an empirical study in developed and emerging economies

Employer reputation is relevant not only to attract but also to retain qualified employees. While in the past financial incentives have been the most important instrument, corporate environmental responsibility (CER) is becoming more and more relevant as a determinant for employer attractiveness and employee commitment. On the basis of signaling theory, we conducted an empirical study among 215 firms in China, Germany, India and the USA. Our results reveal that green strategy & culture, green technology & products, green recruitment & evaluation and green communication positively influence the environmental reputation of a company as an employer and in turn employee commitment. The signaling effects of these CER activities are similar in Germany and the USA (developed economies) as well as in China and India (emerging economies). An exception is green communication, which has a more positive effect on environmental reputation in developed economies. We conclude with managerial and theoretical implications as well as recommendations for future research.     

Institutional perspective of financial sector development: A multidimensional assessment

Financial sector development is a multidimensional process that plays a vital role in the economic growth and development of a country. This study investigates the effect of institutional quality on multidimensional financial sector development, and its dimensions, such as, depth, access, and efficiency. We used a panel dataset of 85 emerging and developing economies from 1996 to 2018 for analysis. Our findings based on 2SLS estimation demonstrate that institutional quality has a significant positive effect on the progress of the financial sector, especially its depth, access, and efficiency. The breakdown analysis shows that most of the key components (control of corruption, government effectiveness, regulatory quality, rule of law, and voice and accountability) of institutional quality enhance the financial sector development. Our empirical results are robust across alternative measures of institutional quality, split-sample analysis, alternative instrument, and estimator. This paper also offers useful policy implications to the stakeholders in emerging and developing economies.     

Institutions and Foreign Subsidiary Growth in Transition Economies: The Role of Intangible Assets and Capabilities

Although transition economies experience significant institutional transformations that vary in their degree and pace, scholarly knowledge of what distinguishes more successful foreign subsidiaries from less successful ones in such environments is limited and inconsistent. We enhance the understanding of this subject by examining how variations in the institutional development of transition economies influence the usefulness of a subsidiary's intangible assets and capabilities and, in turn, their effectiveness in enhancing its growth. Prior research assumes that foreign subsidiaries that operate in any given environment are always better off when they possess strong intangible assets and capabilities. Our analysis of more than 33,000 observations in 14 transition economies challenges this view and enables us to explain why some subsidiaries grow more quickly in less‐developed institutional environments, whereas others more quickly in countries with institutions that are more developed. More specifically, we show that although a subsidiary's intangible assets enhance its growth in transition economies with stronger institutions, these effects are particularly weak or insignificant in transition countries with less developed institutional environments. Conversely, a completely different pattern emerges for subsidiary capabilities, with their marginal effects on subsidiary growth being significantly higher in countries that are institutionally less developed than in transition countries with more developed institutions.     

On the role of institutional factors in shaping working capital management policies: Empirical evidence from European listed firms

The study examines the impact of institutional factors on working capital management for a sample of 5431 European listed firms over the period 2010–2018. Employing a weighted least squares (WLS) methodology, we provide empirical evidence on the role of institutional quality in shaping the working capital policies of European listed firms. The results indicate that firms located in countries with a stronger institutional framework maintain lower levels of working capital on average. The results are robust to different subsamples of firms. The study complements the extant literature by analyzing the effects of institutional quality on working capital management, across a large number of different institutional systems specific to developed and transition economies alike. The results are useful for practitioners and policy makers in understanding the relationship between institutional quality and short-term firm-level decisions.     

Environmentally Sustainable Development through Stakeholder Engagement in Developed and Emerging Countries

This cross‐country study investigates the antecedents and outcomes of corporate environmental responsibility (CER) practices in developed and emerging countries. Based on stakeholder and institutional theory, we conducted an empirical study among firms in Germany, USA, India and China. We found support for a significant positive relationship between regulatory, market and social stakeholder influences, CER practices and business outcomes in the total and individual country samples. Regarding country differences, our data reveal significant similarities and differences between developed and emerging countries. Market stakeholder influences are stronger in developed countries, whereas regulatory and social stakeholder influences do not differ significantly between the two country groups. The relationship between CER practices and positive business outcomes is stronger in emerging than in developed countries. Implications for institutional theory and organizations are outlined. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment