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These institutions differ from place to place, and to a large extent affect the performance of the organization. Politics, legal system, culture and the society in general play a crucial role in mapping out the organizations strategy especially in emerging markets. Peng & Khoury (2008) stated that the issues of institutional constraints need to be addressed in the forefront of international business theory and need not be considered as part of the background or underpinnings.
In support of their argument Peng, Wang & Jiang (2008) used four cases to illustrate the absolute importance of institutions in international business. These are (1) antidumping as entry barriers, (2) competing in and out of India, (3) growing the firm in China, and (4) governing the corporation in emerging economies a) Anti dumping as Entry barriers – Peng, Wang & Jiang (2008) argued that many developed countries have rules against dumping of goods which is strategy employed by new entrants to eliminate competition and gain market share. This is done by selling below the cost price and colluding with others to increase price once the competition is eliminated. The local producers understand that they are protected by law and can effectively prevent the Chinese who do not have institutional framework from doing business in the region. Entrants must beware of the local laws and strategy to be in compliance in other not to suffer and loss. This proves that knowledge of institutional frame work is important. b) Competing In and Out of China – Peng, Wang & Jiang (2008) also stated that political, social and legal frame works in India helped it to become leading powerhouse in information technology. …show more content…
The government had decision to invest in higher the education and its legal and regulatory reforms had liberalized the economy and attracted much need FDI into the system. Western Firms such as GE, IBM and Microsoft have made huge investment in the country even though recent legislations in the US have banned the award of contracts to Indian firms. This therefore means that the overall performance of the Indian business process outsourcing industries will inevitably be dependent on both the local and international institutional frame work. c) Growing the firm from China - Peng, Wang & Jiang (2008) further argued that it has long being observed that a poor regulated economies cannot record high economic growth, but China has proved that in the absence of formal regulatory frame work, informal relationships help regulate the market. Such informal rules such as norms governing interpersonal relationships (networking) play a greater role in driving organizational strategies and performance. Such informal networking tactics have also been reported in Argentina, Chile and India amongst others. These informal networking is also adopted by foreign firms while doing business in China. This proves that cultural rules are important in determining firm success. d) Growing the Corporation in Emerging Economies – In emerging economies organizations are owned by families or the state. When conflicts occur they are usually between the two principal owners, the controlling shareholders and the minority shareholders, this means that a better understanding of the institutional experience and the cost of corporate governance in emerging economies is necessary as these are fundamentally different form that of the developed nations. Conclusion It is believed that Peng, Wang & Jiang (2008) have done a comprehensive job in explaining the nature and effect of institutions in international business. This view is supported by the scarcity of literature criticizing their assertions. On the whole this paper has evaluated the arguments of the Peng, Wang & Jiang (2008) in the light of the examples cited in …show more content…
& Jiang, Y. (2008) ‘An institution-based view of international business strategy: A focus on emerging economies’, Journal of International Business Studies, 39 (5), pg. 920–936. [Online] Available at http://dx.doi.org.ezproxy.liv.ac.uk/doi:10.1057/palgrave.jibs.8400377 (Accessed on 28 January, 2012)
Peng M.W. and Khoury T. A. (2008) ‘Unbundling the Institution based View Of International Business Strategy’ in Rugman A. M. (ed), The Oxford Hand Book of International Business Second Edition Oxford University Press New York. [Online] Available at http://www.utdallas.edu/~mikepeng/pdf/PengKhoury08OHIBRugmanPROOF0804.pdf (Accessed on 30 January, 2012)
Xie Y. H., Zhao H. H., Xie Q. J. and Arnold M. (2011) ‘On The Determinants Of Post-Entry Strategic Positioning Of Foreign Firms In A Host Market: A “Strategy Tripod” Perspective’, International Business Review, 20 (4), pg 477-490 [Online] Available at http://www.sciencedirect.com.ezproxy.liv.ac.uk/science/article/pii/S0969593110001149#
(Accessed on 30 January,
In support of their argument Peng, Wang & Jiang (2008) used four cases to illustrate the absolute importance of institutions in international business. These are (1) antidumping as entry barriers, (2) competing in and out of India, (3) growing the firm in China, and (4) governing the corporation in emerging economies a) Anti dumping as Entry barriers – Peng, Wang & Jiang (2008) argued that many developed countries have rules against dumping of goods which is strategy employed by new entrants to eliminate competition and gain market share. This is done by selling below the cost price and colluding with others to increase price once the competition is eliminated. The local producers understand that they are protected by law and can effectively prevent the Chinese who do not have institutional framework from doing business in the region. Entrants must beware of the local laws and strategy to be in compliance in other not to suffer and loss. This proves that knowledge of institutional frame work is important. b) Competing In and Out of China – Peng, Wang & Jiang (2008) also stated that political, social and legal frame works in India helped it to become leading powerhouse in information technology. …show more content…
The government had decision to invest in higher the education and its legal and regulatory reforms had liberalized the economy and attracted much need FDI into the system. Western Firms such as GE, IBM and Microsoft have made huge investment in the country even though recent legislations in the US have banned the award of contracts to Indian firms. This therefore means that the overall performance of the Indian business process outsourcing industries will inevitably be dependent on both the local and international institutional frame work. c) Growing the firm from China - Peng, Wang & Jiang (2008) further argued that it has long being observed that a poor regulated economies cannot record high economic growth, but China has proved that in the absence of formal regulatory frame work, informal relationships help regulate the market. Such informal rules such as norms governing interpersonal relationships (networking) play a greater role in driving organizational strategies and performance. Such informal networking tactics have also been reported in Argentina, Chile and India amongst others. These informal networking is also adopted by foreign firms while doing business in China. This proves that cultural rules are important in determining firm success. d) Growing the Corporation in Emerging Economies – In emerging economies organizations are owned by families or the state. When conflicts occur they are usually between the two principal owners, the controlling shareholders and the minority shareholders, this means that a better understanding of the institutional experience and the cost of corporate governance in emerging economies is necessary as these are fundamentally different form that of the developed nations. Conclusion It is believed that Peng, Wang & Jiang (2008) have done a comprehensive job in explaining the nature and effect of institutions in international business. This view is supported by the scarcity of literature criticizing their assertions. On the whole this paper has evaluated the arguments of the Peng, Wang & Jiang (2008) in the light of the examples cited in …show more content…
& Jiang, Y. (2008) ‘An institution-based view of international business strategy: A focus on emerging economies’, Journal of International Business Studies, 39 (5), pg. 920–936. [Online] Available at http://dx.doi.org.ezproxy.liv.ac.uk/doi:10.1057/palgrave.jibs.8400377 (Accessed on 28 January, 2012)
Peng M.W. and Khoury T. A. (2008) ‘Unbundling the Institution based View Of International Business Strategy’ in Rugman A. M. (ed), The Oxford Hand Book of International Business Second Edition Oxford University Press New York. [Online] Available at http://www.utdallas.edu/~mikepeng/pdf/PengKhoury08OHIBRugmanPROOF0804.pdf (Accessed on 30 January, 2012)
Xie Y. H., Zhao H. H., Xie Q. J. and Arnold M. (2011) ‘On The Determinants Of Post-Entry Strategic Positioning Of Foreign Firms In A Host Market: A “Strategy Tripod” Perspective’, International Business Review, 20 (4), pg 477-490 [Online] Available at http://www.sciencedirect.com.ezproxy.liv.ac.uk/science/article/pii/S0969593110001149#
(Accessed on 30 January,