The construct of institutional distance through the lens of different institutional perspectives: Review, analysis, and recommendations

Abstract

This paper presents a review and critique of the 20-year-old literature on institutional distance, which has greatly proliferated. We start with a discussion of the three institutional perspectives that have served as a theoretical foundation for this construct: organizational institutionalism, institutional economics, and comparative institutionalism. We use this as an organizing framework to describe the different ways in which institutional distance has been conceptualized and measured, and to analyze the most common organizational outcomes that have been linked to institutional distance, as well as the proposed explanatory mechanisms of those effects. We substantiate our qualitative review with a meta-analysis, which synthesizes the main findings in this area of research. Building on our review and previous critical work, we note key ambiguities in the institutional distance literature related to underlying theoretical perspectives and associated mechanisms, distance versus profile effects, and measurement. We conclude with actionable recommendations for improving institutional distance research.

Organizational and comparative institutionalism in internationalHRM: Toward an integrative research agenda

“…We seek to infuse greater theoretical clarity into international HRM research by distinguishing institutionally informed research in two schools of thought, highlighting key conceptual differences, and exploring the possibilities for theoretical synthesis. This typology draws on earlier work in international management that outlines distinct traditions of theorizing on institutions—notably the work of Hotho and Pedersen (2012), Meyer and Peng (2005, 2016), and Kostova and her coauthors (Kostova et al, 2020; Kostova & Marano, 2019). Further, we build on and extend the approaches of earlier HRM reviews that highlight the persistence of distinct national business systems and associated HRM practices, despite pressures toward convergence (Cooke, Veen, & Wood, 2017; Cooke, Wood, Wang, & Veen, 2019).…”

The UN’s Sustainable Development Goals: Can multinational enterprises lead the Decade of Action?

“…Co-evolution and institutional theory. IB and strategic management theory have developed co-evolution approaches in which the strategic success of a company depends on its adaptation to changing institutional environments (Brammer et al, 2012) and its management of 'institutional distance' (Kostova et al, 2019). Success follows from strategies that enable companies to co-evolve with their environment (Lewin, Long, & Carroll, 1999) and widen the scope to institutional co-evolution, which impacts MNEs in various ways.…”

Business groups and the study of international business: A Coasean synthesis and extension

“…IB has developed considerable expertise using Hofsteder's power-distance and other hierarchical institutional strength variables (Hofstede 2006). Recent work includes Mahajan and Toh (2017), Cao et al (2018), Maseland, Dow and Steel (2018), Tung and Stahl (2018), Kostova et al (2019), and Dastmalchian (2020) 14 A parallel discussion in IB pits internalization against diversification in MNE expansion, e.g., Rugman (1976), Agmon and Lessard, (1977), Caves (1982), Yeung, (1991, 1992), Kwok and Reeb (2000).…”