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Purpose -The study deals with institutional factors that have impact on the operation of east-west alliances. Applying Kostova and Roth's terminology of institutional and relational contexts, this paper aims to address how alliance relationship based on resources, learning and performance organizes and functions, and how institutional factors influence the alliance relationship. Design/methodology/approach -To properly highlight the role of institutional factors, eastern and central Europe (ECE) is divided into four categories, namely fast adapters, high and low medium adapters and slow adapters. A total of 20 alliances operating in different country categories have been selected for the study. In all alliances, foreign partners are Swedish firms and engaged in the manufacturing industry. Semi-structured interviews containing both a fixed set of questions and a set of open-ended questions have been used for data collection. Findings -The impact of institutional factors on firms in slow-adapting countries was uniformly high, the initiatives taken were usually fruitless and ineffective. In the case of medium-adapters, the impact was largely mitigated over time as alliances passed through the different stages. The least impact was, as expected, observed among the alliances in fast-adapting countries. However, the result needs to be taken with some caution as the data include alliances where partners come from a single western country. Practical implications -For direct investment, managers need to take the institutional factors seriously as ECE countries undergo a transition period and the economical situations of these countries shows a wide variation. For example, if need of return is quick, the managers should invest in a fast-adapting country or in a medium-adapting country but not at all in a slow-adapting country. Originality/value -This paper makes a unique contribution by focusing institutional factors which affect strategic alliances in ECE. One future study can concern cultural impact on business environment and new business development in ECE. Another interesting area of research could deal with medium-adapting countries because the members of this group show different level of adaptation and performance.

EXECUTIVE SUMMARYThe importance of the Baltic states has increased due to increase of capital inflow from the West. A large part of the foreign involvement takes the form of alliance with local partners in the region. But how these alliances operate and fulfill the objectives of the partners in the Baltic states remain almost unexplored. By the help of depth interviews, four alliances, two in Estonia and the other two in Lithuania, have therefore been studied in this research work. The theoretical framework is based on the concepts of motives, resources, learning, network, performance and general environment. Cost reduction, market seeking, and development and maintenance of services have been the main motives of foreign firms in entering into the alliances. No clear cut motive is observed from the local partners' side. Learning has been found important for both the partners and concerns cultural differences, local knowhow and adaptation to the Western way in doing business. A broader view of performance is presented by including network development in the article. Profitability, market share, and sales have been seen as short term while network development and relationships as longterm performance criteria in the alliances. The role of general environment on alliances and its impact on network development have also been observed. This study further suggests that alliances offering service dominated products concentrate on the local markets, while alliances offering products with less service elements have export as the target.

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