Journal of International Business Studies

, Volume 49, Issue 7, pp 858–880 | Cite as

Dynamics of pro-market institutions and firm performance

  • Elitsa R Banalieva
  • Alvaro Cuervo-Cazurra
  • Ravi Sarathy


We analyze how pro-market institutions affect firm performance in emerging markets. Integrating transaction costs and signaling theory, we advance three arguments. First, we separate four dynamic components of pro-market institutions: intensifying and fading pro-market reforms and intensifying and fading pro-market reversals. Second, we propose an asymmetric dynamic view whereby not only intensifying reforms but also fading reversals improve firm performance, while not only fading reforms but also intensifying reversals reduce performance. Finally, we argue that more efficient firms perform better under each of the dynamics. We test these arguments on a sample of 1092 firms from 34 emerging markets during 1998–2011.


pro-market institutions pro-market reversals pro-market reforms institutional economics transaction costs signaling theory efficiency performance emerging markets 


Nous analysons comment les institutions pro-marché influencent la performance des firmes dans les marchés émergents. Intégrant les coûts de transaction et la théorie du signal, nous proposons trois arguments. Premièrement, nous distinguons quatre composantes dynamiques des institutions pro-marché : l’intensification et l’atténuation des réformes pro-marché, et l’intensification et l’atténuation des renversements pro-marché. Deuxièmement, nous proposons une vision dynamique asymétrique selon laquelle non seulement l’intensification des réformes mais aussi l’atténuation des renversements améliorent la performance des firmes, tandis que non seulement l’atténuation des réformes mais aussi l’intensification des renversements réduisent la performance des firmes. Enfin, nous avançons que les firmes les plus efficientes fonctionnent mieux grâce à chacune de ces dynamiques. Nous testons ces arguments sur un échantillon de 1092 firmes de 34 marchés émergents durant la période 1998–2011.


Analizamos cómo las instituciones pro-mercado afectan el desempeño de la empresa en los mercados emergentes. Integrando costos de transacción con la teoría de señalización, avanzamos tres argumentos. Primero, separamos cuatro componentes dinámicos de las instituciones pro-mercado: la intensificación y la disminución de reformas pro-mercado, y la intensificación y disminución de las reversiones pro-mercado. Segundo, proponemos una perspectiva de asimetría dinámica en donde no solamente la intensificación de las reformas sino también la disminución de las reversiones reduce el rendimiento, mientras que no solo las disminución de las reformas sino tambien la intensificación de las reversiones reducen los resultados. Finalmente, argumentamos que las empresas más eficientes tienen mejor desempeño bajo cada una de las dinámicas. Hicímos el test de estos argumentos en una muestra de 1092 empresas de 34 mercados emergentes entre 1998 y 2011.


Analisamos como as instituições pró-mercado afetam o desempenho das empresas nos mercados emergentes. Integrando custos de transação e teoria de sinalização, propomos três argumentos. Primeiro, separamos quatro componentes dinâmicos de instituições pró-mercado: reformas pró-mercado em ascensão e declínio, e reversões de reformas mercado em ascensão e declínio. Em segundo lugar, propomos uma visão dinâmica assimétrica, em que não apenas reformas que se intensificam, mas também reversões em declínio melhoram o desempenho das empresas, ao mesmo tempo que não apenas as reformas em declínio, mas também a intensificação das reversões reduz o desempenho. Finalmente, argumentamos que as empresas mais eficientes apresentam melhor desempenho em cada uma das dinâmicas. Testamos esses argumentos em uma amostra de 1092 empresas de 34 mercados emergentes durante o período 1998-2011.


我们分析了亲市场的制度如何影响新兴市场里的公司业绩。 通过整合交易成本和信号理论, 我们提出了三个论点。首先, 我们将亲市场制度的四个动态组成部分分开: 强化和衰弱亲市场改革以及强化和衰弱亲市场逆转。其次, 我们提出了一个不对称的动态观点, 即不仅强化改革而且衰弱逆转都会提高公司业绩; 同时, 不仅衰弱改革而且强化逆转都会降低业绩。最后, 我们认为, 更有效的公司在每个动态下表现更好。我们用1998-2011年间来自34个新兴市场的1,092家公司的样本对这些论点进行了测试。



Authors listed in alphabetical order. We thank the editor, Rajneesh Narula, for his guidance in the review process and for suggesting the macro–micro link, and the anonymous reviewers for valuable insights that helped us improve the manuscript. We also thank Todd Alessandri, Paul Beamish, Oana Branzei, Keith Brouthers, Murali Chari, Charles Dhanaraj, Sergio Correia, Harry Lane, Dev Jennings, Grigorios Livanis, Jerry Loporto, Ed McDonough III, J.T. Li, Will Mitchell, Romel Mostafa, William Ocasio, Sheila Puffer, Ravi Ramamurti, Chris Robertson, Ayse Saka-Helmhout, Michael Sartor, Jean-Louis Schaan, Andreas Schotter, Laszlo Tihanyi, Anthea Zhang, other anonymous reviewers, and audiences at the Academy of International Business and the Academy of Management, for their useful feedback on earlier versions of this manuscript. Banalieva is grateful to the Gary Gregg Fellowship for research support. Cuervo-Cazurra thanks the Walsh Research Professorship, Morrison Fellowship, and Mullin Fellowship for financial support.

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© Academy of International Business 2018

Authors and Affiliations

  • Elitsa R Banalieva
    • 1
  • Alvaro Cuervo-Cazurra
    • 1
  • Ravi Sarathy
    • 1
  1. 1.D’Amore-McKim School of BusinessNortheastern UniversityBostonUSA

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