Beyond the economic institutions of strategy: Strategic responses to institutional variation

Abstract

The 1980s and 1990s constituted a boom period for foreign direct investment. The opening of dozens of new nations to foreign direct investment and the associated confidence in these countries' long-term growth potential led more multinational firms from more countries to undertake investment of greater magnitude in more countries than in any previous historical period. In his 1983 Harvard Business Review article “The Globalization of Markets,” Theodore Levitt (1983) famously advised companies that if they wished to survive, they should expand quickly to global scale. More recently, Thomas Friedman (2005) reinforced Levitt's conclusion in his book “The World Is Flat: Distance is dead. Markets have now converged.” Governments were helpless in the face of the power of global finance. The question posed to managers of multinational corporations was not where to invest globally but rather how fast. During this period, the United Nations reports that the magnitude of global foreign direct investment surged in real terms from $89 billion to $471 billion (constant 2,000 USD) or from 0.5% to 4.4% of global output. The percentage of those flows destined for developing and transition economies soared from 13.9% to a peak of 41.4%.

Citation

Henisz, W.J. (2009), "Beyond the economic institutions of strategy: Strategic responses to institutional variation", Nickerson, J.A. and Silverman, B.S. (Ed.) Economic Institutions of Strategy (Advances in Strategic Management, Vol. 26), Emerald Group Publishing Limited, Leeds, pp. 407-423. https://doi.org/10.1108/S0742-3322(2009)0000026016