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

Giachetti, Claudio and Peprah, Augustine Awuah (2016) The influence of institutional voids in emerging markets on entrant firms’ resource commitment. 58th Annual Meeting of the Academy of International Business, , New Orleans, United States. 27 - 30 Jun 2016.

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
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AIB 2016 Conference Proceedings
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 Ushaped: 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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