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Strategy in emerging economies and the theory of the firm

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Abstract

Indigenous emerging economy (EE) firms are increasingly competing in global markets or against multinational corporations (MNCs) in their home markets. But their institutional context at the national and local levels often suffers from what has been termed “institutional weakness” which is believed to put them at a competitive disadvantage on the global playing field. Yet little is known about how EE institutional weakness at the national level translates into competitive disadvantage at the firm level. In this perspectives paper, we examine this shortcoming in the literature. We utilize three popular theories of the firm—neoclassical economics, the resource-based view, and the nexus of contracts view—to examine how EE institutional weakness at the national level affects strategic choices at the firm level. We then explain how these strategic choices affect firm boundaries, internal organization, and the nature of competitive advantage for firms in EEs.

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Acknowledgement

We would like to acknowledge helpful comments from Mike W. Peng, Garry Bruton and Chung-ming Lau on earlier versions of this manuscript. This research was supported in part by an RGC Research Grant Direct Allocation from The Chinese University of Hong Kong (#2070465). The authors would also like to thank Marc Ahlstrom of Burlington County College for his editorial and research assistance.

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Authors and Affiliations

  1. Department of Management, Hong Kong Baptist University, Kowloon Tong, Kowloon, Hong Kong

    Michael N. Young

  2. Department of Management, China Europe International Business School, Pudong, Shanghai, 201206, People’s Republic of China

    Terence Tsai & Shubo Liu

  3. Department of Management, College of Business Administration, University of Tennessee, Knoxville, TN, USA

    Xinran Wang

  4. Department of Management, The Chinese University of Hong Kong, Shatin, NT, Hong Kong

    David Ahlstrom

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  1. Michael N. Young
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  2. Terence Tsai
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  3. Xinran Wang
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  4. Shubo Liu
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  5. David Ahlstrom
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Correspondence to Shubo Liu.

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Young, M.N., Tsai, T., Wang, X. et al. Strategy in emerging economies and the theory of the firm. Asia Pac J Manag 31, 331–354 (2014). https://doi.org/10.1007/s10490-014-9373-0

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