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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...

This article aims at examining the strategic leeway of firms pursuing business strategies incompatible with the dominant institutional environment in a given market economy. In order to evaluate this question, we focus on the therapeutic biotech industry and draw a German-British comparison. Proponents of the varieties-of-capitalism (VoC) approach assume that German firms underperform in this industrial sector in comparison to British firms due to the institutional framework in which German firms operate; this framework is assumed to provide them with hardly any strategic latitude. The VoC approach is challenged by two alternative perspectives, in both of which it is believed that firms can have a high level of strategic leeway; in the first approach this is possible due to institutional heterogeneity within national market economies; and in the second approach, the above can be seen as the result of economic internationalization. Our empirical findings show that British firms are indeed more competitive in the therapeutical biotech industry, but only to a limited extent. German firms perform better than projected by the VoC approach because they operate in an institutionally heterogeneous environment and due to the impact of internationalization. Thus, we argue for the integration of these three perspectives in one explanatory approach.

Purpose The purpose of this paper is to develop a theoretical framework that addresses the question of how and why multinational corporations (MNCs) from developed economies engage in divergent patterns of institutional entrepreneurship (IE) in emerging markets. Design/methodology/approach The authors combine IB’s concept of institutional voids with comparative capitalism’s insights into the institutional embeddedness of firm capabilities and IE. This theoretical cross-fertilisation is instrumental in developing a refined understanding of institutional voids and how MNCs proactively engage with them. Findings The authors emphasise the notion of institutional voids as a relative concept and, thereby, move away from an ethnocentric view of emerging markets as “empty spaces” that are void of institutions. The authors’ framework proposes that MNCs from liberal and coordinated market economies experience institutional voids differently and engage in different patterns of IE. Research limitations/implications The main limitation of this work is that the propositions are restricted to the country-of-origin effect and that the observations are based on anecdotal evidence only. Against these limitations the authors call for a more comprehensive research agenda in their conclusion. Social implications The paper sensitises policymakers in emerging markets for the potentially different patterns of involvement of MNCs in their institutional environments. Specifically, the authors argue that MNCs may have a strong inclination to rebuild critical elements of their home country’s institutional setting in emerging markets. This touches upon questions of national sovereignty and highlights the need for emerging market policymakers to decide which kinds of institutional settings they would like or not like to see imported. Originality/value The paper provides a new and critical perspective of the mainstream IB concept of institutional voids. The authors’ key contribution is to highlight that the home country institutional context may substantially matter in how MNCs perceive and respond to institutional voids in emerging markets.