3. Organizational Responses to Institutional Changes—A Review and an Extension

Abstract

As economies undergo institutional transition, firms change their internationalization strategies to take advantage of the prevailing institutional environment of the time. Extant studies on firm internationalization have predominantly focused on the effects of host country institutional environments in determining the internationalization strategies of firms. However, recent evidence from emerging market firms indicates that motivations for going international, the choice of international locations and modes of market entry are influenced in part by the institutional environment of the home country. Underlying the successful internationalization of emerging market firms is a transformation in perspective from critical wariness to one involving foreign multinationals in the development process. Drawing upon the experience of Indian firms, this article accounts for the evolution of emerging country multinational enterprises and explains their internationalization by mapping the observed patterns to institutional changes in their home environment. In the process, this article develops propositions that map the internationalization strategies of firms with the maturation of economic institutions in their home country.