The Third Leg in the Strategy Tripod – Institutional Based View

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THE THIRD LEG IN THE STRATEGY TRIPOD – Institutional Based View

Introduction

Strategy has come to play a significant role in international business (IB) in recent times. This is predicated on the fact of complexities associated with globalisation. The interplay of various factors of production in an environment could have been sufficient for MNEs in taking investment decisions. However, experience has shown otherwise. In this light, strategising in the international business arena has been dominated by industry and resource based views, somewhat ignoring the magnitude of institutional impact on investment decisions.

EVALUATION OF ‘THE THIRD LEG IN THE STRATEGY “TRIPOD”’

According to Peng et al (2008), citing Porter(1980) Barney (1991) the industry-based view is rooted in the assumption that the strategy employed by MNEs is determined by the conditions within the industry of focus. Also, the resource based view tends to narrow performance and international business strategy to resources in specific firms. The aggregated views are functions of research findings carried out in environments whose institutions are seemingly standardised and stable. Meanwhile these views have not been able to deal with the nagging questions posed by strategy as regards investment locations.

Recent research directions have established remarkable differences in the institutional frameworks of emerging economies relative to developed economies. This is largely due to long history of cultural, legal and political platforms that organise their businesses. According to Peng et al (2008), the effect of these formal and informal institutions are quite remarkable in shaping strategies and performance even in developed economies. This may not have come to the front burner without recent research on the relationship between institutions and organisational strategies in emerging economies.

Peng et al (2008) are of the view that earlier approach to international IB strategy did



References: Davis L. (2009) ‘Ten years of anti-dumping in the EU: economic and political targeting’. ECIPE Working Paper • No. 02/2009 (Online) Available from: http://www.ecipe.org/media/publication_pdfs/ten-years-of-anti-dumping-in-the-eu-economic-and-political-targeting.pdf (Accessed September 26, 2012) Peng, M.W., Wang, D.Y.L. & Jiang, Y. (2008) ‘An institution-based view of international business strategy: A focus on emerging economies’,Journal of International Business Studies, 39 (5), July/August, pp. 920–936. (Online) Available at: http://dx.doi.org.ezproxy.liv.ac.uk/doi:10.1057/palgrave.jibs.8400377 (Accessed September 23) Searle J. (2005) ‘What is an institution?’ Journal of Institutional Economics (2005), 1: 1, 1–22 (Online) Available from: http://www.laisumedu.org/DESIN_Ibarra/desin/pdf-seminario2006/seminario-2006-04d.pdf (Accessed September 24, 2012) Wong J. (2012) ‘The Guanxi Strategies of Taiwanese Firms in China’s Economic Reforms’ The Journal of Global Business Management Volume 8 * Number 1 * February 2012. (Online) Available at: http://www.jgbm.org/page/15%20Jeng-Min%20Wong.pdf (Accessed September 24, 2012)

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