For nearly two decades, scholars in international business and management have explored the implications of institutional voids for firm strategy and structure. Although institutional voids offer both opportunities and challenges, they have largely been associated with firms' efforts to avoid or mitigate institutional deficiencies and reduce the transaction costs associated with operating in settings subject to those institutional shortcomings. The goal of this special issue is to advance scholarship on this topic by (a) exploring institutional voids that are new to the literature, (b) providing a deeper assessment of the different ways in which firms respond to these voids, and (c) utilizing diverse disciplines and theoretical approaches to do so. In this introduction, we first review and synthesize extant research on institutional voids, tracking the evolution of institutional void scholarship since the inception of the concept (Khanna & Palepu, Journal of Economic Literature, 45(2):331-372, 1997) and providing our perspective on its contributions and limitations. We then summarize the contributions of the articles included in this special issue. In addition to identifying an array of institutional voids -economic and social -the articles highlight four different strategies for responding to them: internalization, substitution, borrowing and signaling. Drawing on these, we develop new insights on the implications of institutional voids for firm behavior. We conclude with suggestions for future research.

Absorptive capacity is frequently highlighted as a key determinant of knowledge transfer within MNEs. But how individual behaviour translates into absorptive capacity at the subsidiary level, and exactly how this is contingent on subsidiaries' social context, remains under-addressed. This not only limits our understanding of the relationship between individual and organizational level absorptive capacity, it also hampers further research on potentially relevant managerial and organizational antecedents, and limits the implications we can draw for practitioners that seek to increase their organization's capacity to put new knowledge to use. To address this shortcoming we conduct an in-depth comparative case study of a headquarters-initiated knowledge transfer initiative at two subsidiaries of the same MNE. The findings demonstrate that social interaction is a prerequisite for subsidiary absorptive capacity as it enables employees to participate in the transformation of new knowledge to the local context and the development of local applications. Second, the findings illustrate how organizational conditions at the subsidiary level can impact subsidiary absorptive capacity by enabling or constraining local interaction patterns. These insights contribute to the absorptive capacity literature by demonstrating the scale and scope of social interaction as a key link between individual-and organizational-level absorptive capacity.

Research and Development (R&D) investment is seen as a fundamental driver of high-tech small and medium-sized (SME) firm performance. However, the same driver may be constraining growth among non-high-tech SMEs as it increases the level of risk faced by such firms. We challenge this argument by examining the relationship between R&D intensity and performance among nonhigh-tech SMEs. While the size of R&D investments is, by definition, limited in the non-high-tech sector, our study shows that such investments are important for non-high-tech firms. There is, however, an inverted U-shaped relationship between R&D intensity and performance among non-high-tech SMEs. Furthermore, increased internationalization leads non-high-tech SMEs to exploit their R&D investment more effectively to enhance firm performance, provided that R&D investment levels exceed a critical threshold.

We propose solutions to two recurring problems in cross-national research: response style differences and language bias. In order to do so, we conduct a methodological comparison of two different response formats-rating and ranking. For rating, we assess the effect of changing the commonly used 5-point Likert scales to 7-point Likert scales. For ranking, we evaluate the validity of presenting respondents with short scenarios for which they need to rank their top 3 solutions. Our results -based on two studies of 1965 undergraduate and 1714 MBA students in 16 different countries -confirm our hypotheses that both solutions reduce response and language bias, but show that ranking generally is a superior solution. These findings allow researchers to have greater confidence in the validity of crossnational differences if these response formats are used, instead of the more traditional 5point Likert scales. In addition, our findings have several practical implications for multinational corporations, relating to issues such as selection interviews, performance appraisals, and cross-cultural training.ß

LUFTHANSA INTRODUCTIONIn recent years, the notion of business models has gained momentum in management research (Baden-Fuller et al., 2010;Zott, Amit and Massa, 2011). In this debate, scholars have also discussed barriers to changing the business model of existing firms. Several barriers have been identified, such as cognitive lock-ins (Chesbrough and Rosenbloom, 2002). The institutional environment of market economies in which firms operate has not yet been discussed as a barrier and so is identified as a research gap in the debate on business models (Zott and Amit, 2013).Whereas the institutional framework of market economies such as the United Kingdom (UK) provides a high degree of flexibility to firms, the framework of market economies such as Germany provides a substantially lower degree of flexibility (Crossland and Hambrick, 2011;Hall and Soskice, 2001). We investigate how business model changes in firms in the UK and Germany are affected by the influence of employee representation. This employee representation has been discussed in recent work on strategic management as a potential constraint on strategic choice, which accounts for the differential in flexibility provided to firms in both the aforementioned countries (Fiss and Zajac, 2004).We selected the aviation industry because it is a globalised industry in which established companies from different countries face similar challenges, particularly the challenge presented by low cost carriers (LCCs). Since the mid-1990s, the European aviation industry has undergone a massive transformation. The traditional business model of full service carriers (FSCs) has been challenged by LCCs. Hence, FSCs face strong pressures to reconsider their traditional business The paper has been accepted for publication in the British Journal of Management in Dec. 2014! 2 Changing Business Models models based purely on differentiation and move them, at least to some extent, in the direction of the LCC model (Bamber et al., 2009; Delfmann et al., 2005). This paper analyses whether, and the extent to which, two FSCs in two different countries (BA in the UK and LH in Germany) have adopted elements of the LCC model, and the extent to which this process has been influenced by employee representation. There have been no systematic comparisons of the strategic reactions of FSCs, which are embedded in different institutional frameworks, to the low cost pressure exerted by LCCs in the aviation industry. Hence, we propose a systematic comparison of two leading FSCs and their strategic responses to the emergence of LCCs, originating from contrasting market economies, the UK and Germany. Our analysis focuses on the following two questions: The paper is structured as follows. First, we distinguish between strategy and the business model concept and discuss recent work on strategic management which has considered the effect of institutions on strategic choice. Second, we outline our methodological approach. Third, we present the findings of our two case studies. Finally, we discuss the th...