Understanding Failure in International Retailing: An Institutional Framework for Future Investigation

Abstract

The move from domestic market to one that includes major international firms is not proving an easy task for retailers. Whiles prior research acknowledged differences between country environments and stressed the importance of addressing these differences in order to avoid the dangers and failures inherent in internationalisation, there is still lack of suitable framework that captures the effects of the institutional environment on failure in international retailing. The purpose of this paper is to introduce institutional theory as a complementary framework to explain failure in international retailing and suggest propositions for further research. The paper seeks to answer the research question: What are the factors in the institutional environment of a host country that affect failure in international retailing? Consequently, the objective of this paper is threefold: (1) to introduce institutional theory as alternative theoretical framework to conceptualise failure in international retailing; (2) to identify institutional factors that exert pressures on the operational activities of international retailers in foreign markets and which leads to failure; (3) to provide some research propositions for further investigation. This paper offers several contributions. First, we extend current theories in international business, particularly, the literature on retail internationalisation and institutional theory by exploring pressures and difficulties that international retailers face in a new host institutional environment. Second, we identify a set of institutional factors that exert pressures on international retailers in foreign markets that lead to failure. Finally, with the institutional approach, this study fills the gap in earlier works by developing a complementary framework along with 11 propositions for future research.One major limitation of this paper is that it is conceptual; hence, further empirical analysis is needed to test the suggested propositions.