Understanding When MNCs can Overcome Institutional Distance: A Research Agenda

Abstract

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

“…Since its introduction in the literature in the mid-1990s (Kostova, 1996(Kostova, , 1997, the construct of institutional distance has gained prominence in international business research (e.g., Aguilera & Grøgaard, 2019;Bae & Salomon, 2010;Berry, Guillén, & Zhou, 2010;Beugelsdijk, Ambos, & Nell, 2018a;Fortwengel, 2017;Jackson & Deeg, 2019;Zaheer, Schomaker, & Nachum, 2012). Broadly defined as the difference between the institutional profiles of two countries, typically the home and the host country of an MNC (Kostova, 1996), institutional distance has quickly become one of the most widely used types of distance in this research.…”

“…The proliferation of definitions, operationalizations, and proposed theoretical effects, however, has also raised concerns about the tightness and rigor of this construct and the comparability of institutional distance research across studies. A number of scholars have been troubled by such somewhat undisciplined diversity and the potential problems it might create, and have offered ideas of how to strengthen this research, conceptually and methodologically (Bae & Salomon, 2010;Berry et al, 2010;Beugelsdijk et al, 2018a;Fortwengel, 2017;Hotho & Pedersen, 2012;Philips, Tracey, & Karra, 2009;Zaheer et al, 2012). We too recognize that, at the extreme, such a broad and unscripted approach may create the sense that institutional distance is a ''catch all'' construct simply substituting for country.…”

Mapping the impact of home‐ and host‐country institutions on human resource management in emerging market multinational companies: A conceptual framework

“…This complexity and multiple embeddedness raises unique challenges for MNCs (Meyer, Mudambi, & Narula, ), but it can also offer additional room of maneuver. Therefore, MNCs offer a uniquely promising research setting to explore the interrelationships between institutions at the macro level and firm behavior at the micro level (Fortwengel, ).…”

“…Here, the uncertainty associated with institutions may be an important factor determining to what extent “reverse diffusion” of practices by MNCs into the home country will actually lead to institutional change. While it may be the case that the more ambiguous are home‐country institutions, the more leeway there is for new practices to trigger wider change, it may also be the case that high uncertainty may actually restrict reverse diffusion because sustained support for a new practice is lacking (c.f., Fortwengel, ). Furthermore, recent research has shown that state capacity plays a moderating role in processes of diffusion of new institutional practices across countries (Guillen & Capron, ).…”

Chinese Outward FDI as a Stimulus to Research in International Business

“…Such overseas investments may not be motivated to internalise imperfect external markets simply to achieve greater organisational and productive efficiency abroad within a specific business context, but rather to more effectively benefit the wider home economy, and possibly to exert political power. This 'coordinated approach' also calls into question how Chinese firms experience and respond to institutional distance, and their ability to deviate in their behaviour from host country norms-or indeed to change them (Fortwengel 2017).…”