Institutions, resources, and entry strategies in emerging economies

TLDR

The study examines how market‑supporting institutions influence foreign investors’ entry strategies into emerging economies, integrating an institution‑based view with resource‑based considerations. The authors analyze alternative entry modes—greenfield, acquisition, and joint venture—to overcome market inefficiencies, using survey and archival data from India, Vietnam, South Africa, and Egypt. They find that resource‑seeking strategies differ by institutional context: joint ventures are favored in weaker institutions, while acquisitions are preferred in stronger ones, and the data support these hypotheses. © 2008 John Wiley & Sons, Ltd.

Abstract

Abstract We investigate the impact of market‐supporting institutions on business strategies by analyzing the entry strategies of foreign investors entering emerging economies. We apply and advance the institution‐based view of strategy by integrating it with resource‐based considerations. In particular, we show how resource‐seeking strategies are pursued using different entry modes in different institutional contexts. Alternative modes of entry—greenfield, acquisition, and joint venture (JV)—allow firms to overcome different kinds of market inefficiencies related to both characteristics of the resources and to the institutional context. In a weaker institutional framework, JVs are used to access many resources, but in a stronger institutional framework, JVs become less important while acquisitions can play a more important role in accessing resources that are intangible and organizationally embedded. Combining survey and archival data from four emerging economies, India, Vietnam, South Africa, and Egypt, we provide empirical support for our hypotheses. Copyright © 2008 John Wiley & Sons, Ltd.