Aig Case

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1. What, if any, were the relevant institutional voids in China? The relevant institutional voids for AIG in China were:
1.Macro level political and social context- media and non-governmental institutions had very little influence, but the government did, there was a political power monopoly. 2.Macro level openness of the economy – the Chinese economy lacked openness to foreign direct investment. 3.Product markets – there was weak property right protection, in the Chinese market there was no well-established distribution network, and there was a lack of marketing/research intermediaries. 4.Labour markets – China had only a few agents with experise in insurance, there was a lack of expertise in the labour force.

2. Based on the framework developed by Khanna et al., what types of strategies should foreign insurance companies pursue? What did AIG do to cope with the institutional voids? According to Khanna et al. foreign insurance companies should use option one: adapt to the host country, keeping its own core dominant logic. This may inspire other companies to do things the same as they prove to be successful. For instance: AIG introduced the agency distribution system to China and nowadays this system is widely adopted by most insurance companies What AIG did to cope with the institutional voids:

1.Macro level political and social context – AIG build relationships, such as a strong political network. By for example visit the country often and make investments, ’AIG opened an infrastructure fund and soon started its first project in Shanghai.’ 2.Macro level openness of the economy – in order to build FSAs in China AIG set up a joint venture with PICC, this contributed to the development of the relationship between State Council members and AIG and between deputy prime minister and AIG. 3.Product markets – AIG introduced the agency distribution system to China, it learned about the market and the culture, and it tailored its products to the Chinese...
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