International business responses to institutional voids

Abstract

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.

Reconciling Perspectives on Clusters: An Integrative Review and Research Agenda

“…The international business literature examining the way in which firms respond to weak formal institutions also provides similar arguments and evidence (cf. Doh et al 2017). Firms may be successful in settings where formal institutions are missing or weak by relying on trust-based collaborative relations (Landa 2016) or developing close business-state relationships to reduce costs and risks (Child et al 2012).…”

“…We take as our example an investigation of the drivers of innovation in a particular industry distributed over several regions, using the firm as the unit of analysis. Our data consist of the geographical externalities to which the firms are subject, their networks and overall network structure, the strength of formal r Five-point Likert scale measuring trust towards co-located firms ࣙ 3 Charron et al (2015); Doh et al (2017); Palepu (1997, 2000); Rodriguez-Pose and Di Cataldo (2015); Verbeke and Kano (2013) Other ( Cohen and Levinthal (1990); Love and Roper (2015) Note: N denotes number of cases; P i denotes the ith percentile. and informal institutions (the latter proxied through trust), and firms' R&D activities (Table 2).…”

Interpersonal relations in China: Expatriates’ perspective on the development and use of guanxi

“…Business deals in China, therefore, tend to rely on mutual trust between the parties rather than a legal recourse for conflict resolution and contract implementation. To overcome these institutional voids, companies and individuals tend to use informal processes to build trust and interpersonal relations (Doh, Rodrigues, Saka-Helmhout, & Makhija, 2017;Xu & Hitt, 2012) and guanxi is seen to be the facilitator for these relations (Fan, 2002). proposed a process of guanxi building in China that includes three stages: initiating, building, and using guanxi.…”

Foreign actors and intellectual property protection regulations in developing countries

“…This is especially significant in light of the institutional voids in developing countries. A recent special issue in the Journal of International Business Studies (Doh, Rodrigues, Saka-Helmhout & Makhija, 2017) on institutional voids emphasizes the need for further research on the topic. We contribute to this literature with insights into the actors that influence developing countries' regulatory adoption of formal institutional arrangements mirroring those in advanced countries.…”