Institution-Based View in International Business Strategy

This document discusses the institution-based view and its role in international business strategy. It explains how the institution-based view complements industry-based and resource-based views, particularly in emerging markets. The document emphasizes the importance of considering formal rules, key resources, and competitiveness in international business.

Management

Table of Contents
Answer 1..........................................................................................................................................3
Answer 2..........................................................................................................................................4
References........................................................................................................................................5
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Answer 1
Institution-based view complements industry-based view and resource based view in order to
sustain a strategy tripod collectively. In today's environment, there are so many factors that are
considered for organizational strategy formulation and performance. These factors include:
position of industry, capability, resources, institutions etc. If all the three approaches are
followed together, it may help organizations in providing new perspectives of international
business such as organizational strategy in international business and international success and
failure of organizations (Peng, Wang, & Jiang, 2008). Hence, it can be inferred that institutional
based view complements industry and resource based view, when firms operate in international
market, because at that time, institution based view help the firms to know the rule of game and
improve their competitiveness in emerging markets (Garrido, Gomez, Maicas, & Orcos, 2014).
The approach of dealing in the business environment differs for all the three views as, institution
based view approach suggests organizations to have deep knowledge of rules of business while
entering into a new market while the industry based view approach is more focused on degree of
competitiveness possessed by an organization. Resource based view identifies the potential key
resources of a firm and product differentiation (Truyens, De Bosscher, Heyndels, & Westerbeek,
2014).
The institution-based view is the third leg of the strategy tripod because it is more concentrated
on the ever-changing relations of institutions. This approach takes strategic choices to be the
result of such integration (Peng, Sun, Pinkham, & Chen, 2009). Under industry- based and
resource-based view, strategic choices are determined by industry situation & company’s
competences, but under institution based view strategic choices are determined by the formal and
informal constraints of an institution. That's why International business strategy cannot just relay
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on industry conditions and capabilities. An institution-based view is necessarily to be adopted in
conjunction with industry- and resources-based view because of the profound gap in the
institutional frameworks between the developed and emerging economies. Institution based view
helps the organizations to consider the formal rules and guidelines along with identifying
potential key resources and competitiveness of the market (Peng, Wang, & Jiang, 2008).
Answer 2
Every people, caste, society or even country has its own values and beliefs. These values and
beliefs are connected to the emotions of individuals and, emotions are the strongest attribute that
cannot be altered easily. Ethics are also a part of moral values and beliefs of individuals towards
an activity if an activity for a person force him/her to alter his ethics he/she most provability will
not take part in that activity. So, if global companies decide to deal with different market
segments in different countries with the same set of rule, it might give them pain because at one
place that set of rule might work but at another place that set of rule decided by a firm might
affect the ethics associated with people and culture of that place. Global organizations might
consider this approach appealing but, this is clearly inadequate approach.
According to an article of Harvard business review, ethical imperialism is absolutism. Ethical
imperialism clashes with people's beliefs as tradition of different cultures must be respected.
Loyalty to the community is the foundation of all ethical behavior in some cultures. For example
in Japan, business ethics are strongly connected to the loyalty towards the company and nation
while in the U.S. tradition of ethics stress more on fairness, equality and freedom. So it is tough
to conclude whether any global company operating in both countries should go for the U.S. The
U.S. tradition of ethics or for Japan Tradition of ethics or they should develop a new code of
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ethics because in any of the three cases, the conflicts will occur in particular cultures and so the
work culture of the company will also be impacted. Hence, according to HBR when cultures in
different societies or countries have different standards of ethical behavior, in that case, a global
company should not adopt ethical imperialism approach as it can be a disastrous mistake. Global
companies cannot overrule the home country's standards or ethics neither formulate international
standards of business conduct (Donaldson, 2007).
In spite of being ethical imperialist, global companies must adopt the strategy of balancing the
extremes. This strategy shape ethical behavior in every country by following the 3 principles.
The first principle is respecting the core human values as it is the base for defining moral
threshold for any business undertakings. The second principle is respecting the local traditions,
while the third principle is the belief that context designed for business activities matters a lot
when determining what is wrong and what is right. So overall, respecting the differences should
be adopted as crucial ethical practice by the global companies.
References
Donaldson, T. (2007). Values in Tension: Ethics Away from Home. Retrieved March 2019, from
Hbr.org: https://hbr.org/1996/09/values-in-tension-ethics-away-from-home
Garrido, E., Gomez, J., Maicas, J. P., & Orcos, R. (2014). The institution-based view of strategy:
How to measure it. BRQ Business Research Quarterly, 17(2), 82-101.
Peng, M. W., Sun, S. L., Pinkham, B., & Chen, H. (2009). The institution-based view as a third
leg for a strategy tripod. Academy of Management Perspectives, 23(3), 63-81.
Peng, M. W., Wang, D. Y., & Jiang, Y. (2008). An institution-based view of international
business strategy: a focus on emerging economies. Journal of International Business
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Studies, 39(5), 920-936.
Truyens, J., De Bosscher, V., Heyndels, B., & Westerbeek, H. (2014). A resource-based
perspective on countries’ competitive advantage in elite athletics. International Journal
of Sport Policy and Politics, 6(3), 459-489.
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