Learning about the institutional environment

Abstract

Cross-national variation in institutional environments adds uncertainty to foreign operations, which in turn affects international strategy decisions such as when to enter a market, the entry mode used if entering, as well as the performance of foreign entries. Although all firms are exposed to the influence of a host country's institutional environment, firms exhibit differential responses to this influence based on resident knowledge and capabilities. Managers in a multinational firm must therefore work to align their strategies with both the hazards and opportunities they face in a given institutional environment, as well as with the firm-specific knowledge and capabilities at their disposal. Rather than taking institutions as an immutable constraint when making decisions, a firm can cultivate and exploit its ability to successfully manage diverse institutional hazards in its host country environments.

Citation

Henisz, W.J. and Delios, A. (2000), "Learning about the institutional environment", Ingram, P. and Silverman, B.S. (Ed.) The New Institutionalism in Strategic Management (Advances in Strategic Management, Vol. 19), Emerald Group Publishing Limited, Leeds, pp. 339-372. https://doi.org/10.1016/S0742-3322(02)19011-5