AIB 2012 Conference Proceedings - Academy of International ...

TUESDAY
Our panel will discuss cultural and institutional variations across the Asian business context. In doing so, it
seeks to shed new light on empirical patterns in the emerging economic center of gravity of the world economy
with respect to important IB constructs such as liability of foreignness, cultural distance, and institutional
distance. This panel will touch on topics such as the status and evolution of corporate governance in Asia
(Ahmadjian); employment relations (Frenkel & Yu); cross-cultural differences and patterns (Javidan, Redding, &
Witt); and the shape of social capital (Li). This panel has a sister panel exploring other aspects of the cultural
and institutional context of Asia. (For more information, please contact: Michael A. Witt, INSEAD, Singapore:
michael.witt@insead.edu)
Session: 3.1.3 - Competitive
Track: 3 - IB Theory, FDI, and Entry Mode
Adaptation and Local Responsiveness
Presented On: July 3, 2012 - 09:00-10:15
Chair: Ajai Gaur, Rutgers University
The Impact of Mismatches between Local Practices and Values on Inward MNE Affiliate Activity: An Institutional
Perspective
Arjen Slangen, RSM Erasmus University
Sjoerd Beugelsdijk, University of Groningen
We draw on institutional theory to examine how intra-country mismatches between local business practices and
local values influence inward multinational enterprise (MNE) affiliate activity. We argue that foreign MNE
affiliates generally increase their local legitimacy by adopting local practices, but that this legitimacy increase is
lower if there is a larger mismatch between local practices and values. We therefore hypothesize that this
mismatch is negatively related to a country's inward MNE affiliate activity. We also hypothesize that this
negative relationship will be stronger for developed countries and production-oriented affiliate activity than for
developing countries and local sales-oriented affiliate activity. We find support for these hypotheses in a panel
data analysis of U.S. foreign affiliate sales over the 1994-2007 period, using GLOBE data to measure a country's
practices-values mismatch. Our study adds to institutional theory by shedding more light on the contribution of
local practice adoption to affiliate legitimacy and extending the concept of institutional duality. (For more
information, please contact: Arjen Slangen, RSM Erasmus University, Netherlands: aslangen@rsm.nl)
Institutional Perspective on MNE Adaptation: An Empirical Approach
Andrei Kuznetsov, University of Central Lancashire
Marcus Jacob, EBS European Business School
This paper contributes to a better understanding of global corporate and industrial change dynamics triggered
at the firm level. Our focus is on convergence vs. divergence of national institutional systems. Data are drawn
from a large N survey of German firms in the UK and British firms in Germany. Our results for adaptation
behavior of British subsidiaries in Germany suggest that at the firm level the primacy of national institutions and
institutional complementarity as determinants of the organizational behavior of MNEs could be overstated.
Nonetheless, evidence that German MNEs in Britain strongly seek to opt for the strategic choices for which there
is institutional support in the host country suggests that complementarity is functional enough to incite
adjustment even in the absence of strong formal pressure. The evidence that both German and British firms
seem to prefer practices characteristic of liberal market economies may pose a problem for institutional stability
in Germany and generates implications for the likely pathways of institutional change. (For more information,
please contact: Andrei Kuznetsov, University of Central Lancashire, United Kingdom: akuznetsov@uclan.ac.uk)
AIB 2012 Conference Proceedings
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