Asia Pacific Journal of Management

, Volume 31, Issue 2, pp 331–354 | Cite as

Strategy in emerging economies and the theory of the firm

  • Michael N. Young
  • Terence Tsai
  • Xinran Wang
  • Shubo LiuEmail author
  • David Ahlstrom


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.


Institutions Strategic choices Emerging economies Theory of the firm 



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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Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  • Michael N. Young
    • 1
  • Terence Tsai
    • 2
  • Xinran Wang
    • 3
  • Shubo Liu
    • 2
    Email author
  • David Ahlstrom
    • 4
  1. 1.Department of ManagementHong Kong Baptist UniversityKowloon TongHong Kong
  2. 2.Department of ManagementChina Europe International Business SchoolShanghaiPeople’s Republic of China
  3. 3.Department of Management, College of Business AdministrationUniversity of TennesseeKnoxvilleUSA
  4. 4.Department of ManagementThe Chinese University of Hong KongShatinHong Kong

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