MNE microfoundations and routines for building a legitimate and sustainable position in emerging markets

Abstract

A number of studies have analysed how multinational enterprises (MNEs) develop appropriate strategies for managing the institutionally different contexts of various markets. However, we still know rather little about how MNEs manage different institutional pressures when they operate in emerging markets. These markets have a higher level of uncertainty as their values and structures undergo change. This paper investigates the microfoundations and routines that can be part of developing a firm's capability to achieve a legitimate and environmentally sustainable position in emerging markets. We focus upon the microfoundations and routines for managing regulative, normative, and cultural-cognitive pressures. The paper utilizes an extensive qualitative case study approach. It reports a study at corporate and subsidiary levels of 3 Swedish MNEs in the in 4 markets: Brazil, Russia, India and China. The study identifies a set of routines for managing each of the 3 institutional forces and supporting microfoundations at individual, interactive, and structural levels. We are thus able to offer new insights on how the institutional context interacts with MNE strategies and identify more generic routines and microfoundations behind the capability for developing a sustainable market position.

The Role of Non-market Strategies in Establishing Legitimacy: The Case of Service MNEs in Emerging Economies

“…As such, while the extant literature has focused strongly on the determinants of political strategies (Blumentritt and Nigh 2002;Meznar and Nigh 1995), there is a need for empirical analyses to be conducted not only on the outcomes of political strategies (Li et al 2008) but also on the effectiveness of political strategies across different contexts (Demirbag et al 2017;Getz 1997). Rather than focusing on how MNEs negotiate with host governments upon entering foreign markets (Hillman and Wan 2005;Mondejar and Zhao 2013;Zhang et al 2016), our empirical findings extend the extant knowledge in this area by highlighting how SMNEs, use a variety of post-entry CPA and CSR tactics to navigate and offset any institutional voids (Khanna and Palepu 2010) in order to establish market legitimacy (Elg et al 2017;Kostova and Zaheer 1999) and to overcome their liability of foreignness (Zaheer 1995).…”

“…This study responds to the core objectives of the Call for Articles aimed at examining how SMNEs engage in internationalisation activities; in particular, it underscores the mechanisms through which SMNEs seek to develop legitimate market positions within emerging economies (Elg et al 2015(Elg et al , 2017. The article addresses the overlapping of CPA and CSR across international contexts by exploring the tactics enacted by foreign-owned SMNEs operating in Ukraine.…”

“…This article contributes to the extant literature on the behaviours of MNEs within emerging economies (Akbar and Kisilowski 2015;Elg et al 2015Elg et al , 2017Hillman and Wan 2005;Puck et al 2013)-and, in particular, on how foreign firms utilise CPA within this context (Elsahn and Benson-Rea 2018;Puck et al 2013)-by focusing on the mechanisms involved in non-market strategies (De Villa et al 2018;Lawton et al 2013a). As such, while the extant literature has focused strongly on the determinants of political strategies (Blumentritt and Nigh 2002;Meznar and Nigh 1995), there is a need for empirical analyses to be conducted not only on the outcomes of political strategies (Li et al 2008) but also on the effectiveness of political strategies across different contexts (Demirbag et al 2017;Getz 1997).…”

“…The findings suggest that most of the firms were engaged, to varying degrees, in aligning forms of CPA/CSR activities. The examples below illustrates how, upon developing their business operations in Ukraine, foreign-owned firms had chosen to engage in philanthropic activities as a way to seek legitimacy (Elg et al 2017) across a wide range of stakeholders.…”

“…SMNEs are forced to undertake a variety of 'social' obligations that necessarily have a substituting effect. While the engagement in such activities clearly involves organizational and economic costs for the firm, SMNEs profit from them by improving their legitimacy (Elg et al 2017) not only in the eyes of predatory and corrupt state officials (Lawton et al 2013a) but also in terms of society at large and of gaining access to an attractive market (Brouthers et al 2008).…”