Strategy and the Institutional Envelope

Abstract

Classical approaches to strategy are built around two dominant pillars to explain firm performance: industry structure and firm strategy and capabilities. Firm performance is typically seen as a result of a "fit," or complementarity, between industry structure and firm strategic choices. We supplement the classical model of strategy with a third pillar, that of the institutional envelope. We argue that the institutional envelope, as its name suggests, is a pervasive influence on the strategy-performance relationship. Both firm strategy and industry structure are simultaneously shaped by, and shape, the institutional envelope, which is both a primitive to and product of firm strategy and industry structure. It also moderates the relationship between firm strategy and industry structure. Institutional considerations are therefore not simply a subfield of strategy research. The institutional envelope is a critical component of any consideration of strategy. Theories of industry structure and strategic choice are insufficient without a fully formed model of the institutional envelope at their very foundation. All strategies, market or non-market, are consciously or unconsciously related to their institutional envelope-being tailored to conform to the institutional envelope or tailoring the institutional envelope to suit them. We see this institutional project that we are advancing as nothing less than the third great wave of strategy research, building off the previous waves emphasizing industry structure and firm choice and resources. It is in the context of this institutions-based strategy model that we preview the papers in the special issue.

Family Business Growth Around the World

“…Whereas H1 predicts a positive impact of family influence on firm growth, the institutional environment may have an important moderating effect. This is in line with the prior research that has emphasized the theoretical and practical importance of institutional environments for family firm decision-making processes (Ahuja et al, 2018; Banalieva et al, 2015; North, 1990; Peng & Jiang, 2010).…”

The effectiveness of effectuation: a meta-analysis on contextual factors

“…In such contexts, effectual entrepreneurs can better cope with institutional uncertainty by means of co-creation with important stakeholders. The findings in relation to industrial and market moderators are relevant to the strategy tripod literature, which has suggested that the effectiveness of corporate strategies is constrained by industrial competition and institutional infrastructure (Ahuja et al , 2018; Peng et al , 2009). In particular, studies of effectuation should consider industrial and market context, beyond specific organizational and entrepreneurial characteristics.…”

The liabilities of foreign institutional ownership: Managing political dependence through corporate political spending

“…Departing from existing research, our study points out that noncontrolling ownership stakes by foreign institutional investors may indirectly shape firms' CPS through intensifying these firms' political dependence. Finally, at a broader level, our study contributes to a growing call for better understanding of how firms shape their environments (Ahuja, Capron, Lenox, & Yao, 2018). Prior research has focused on the actions of shaping (Gavetti et al, 2017); our study helps unpack some of its antecedents.…”

“…Finally, at a broader level, our study contributes to a growing call for better understanding of how firms shape their environments (Ahuja, Capron, Lenox, & Yao, 2018). Prior research has focused on the actions of shaping (Gavetti et al, 2017); our study helps unpack some of its antecedents.…”