The influence of institutional voids in emerging markets on entrant firms’ resource commitment

Giachetti, Claudio and Peprah, Augustine Awuah (2017) The influence of institutional voids in emerging markets on entrant firms’ resource commitment. (doi:10.5465/ambpp.2016.14017abstract).

Abstract

The existing international management literature has presented inconclusive results about the effect of institutional voids in emerging economies on the extent to which firms move resources in these markets. With the lens of institutional theory and transaction-cost theory in international business, this paper examines how institutional voids in an emerging economy influence the decision of firms based in developed countries to move resources in that economy in terms of: 1) the degree of control of the entry strategy employed and 2) the level of delocalization of business functions. By relying on a sample of 90 Italian firms operating in China between 2001 and 2010, results of this study show that the relationship between institutional voids in an emerging economy and developed country-based firm’s resource commitment in that emerging economy is invented U-shaped: as institutional voids in the emerging economy increase, firms based in developed countries prefer to choose entry strategies with higher degree of control as well as increase the number of business functions in the emerging economy; however, beyond a certain level of institutional voids, firms tend to reduce the entry mode degree of control and the number business functions within the emerging economy.

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Contributors

Author: Augustine Awuah Peprah

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