Title: Not trading favours: MNE activity in economies shaped by institutional voids

Authors: Michael-Jörg Oesterle; Björn Röber

Addresses: Department of International and Strategic Management, University of Stuttgart, Keplerstraße 17, D-70174 Stuttgart, Germany ' Department of International and Strategic Management, University of Stuttgart, Keplerstraße 17, D-70174 Stuttgart, Germany

Abstract: When Advanced Market MNEs (AMNEs) consider operating in developing and emerging economies, they will frequently face the challenge of how they should cope with informal business practices. The respective firms are often trapped in a conflict area between business ethicist and neo-institutionalist requirements. According to the first perspective, they must comply with Western ethical standards and stay away from potentially compromising informal business practices. From a neo-institutionalist point of view, however, AMNEs should adapt their managerial practices to the realities in developing and emerging economies. In this paper, we present indicators showing that AMNEs respond with market avoidance to this conflict area. Therefore, we try to open a discussion on whether the current assessment of informal business practices in institutionally developed countries is adequate. Beneficial informal business practices such as trading favours may present a legitimate third way between strictly following business ethics and neo-institutionalism as they have the potential to fill institutional voids.

Keywords: institutions in developing and emerging economies; institutional voids; informal business practices; trading favours.

DOI: 10.1504/EJIM.2017.087566

European Journal of International Management, 2017 Vol.11 No.6, pp.688 - 710

Received: 24 Oct 2015
Accepted: 11 Aug 2016

Published online: 19 Oct 2017 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article