Not trading favours: MNE activity in economies shaped by institutional voids
by Michael-Jörg Oesterle; Björn Röber
European J. of International Management (EJIM), Vol. 11, No. 6, 2017

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.

Online publication date: Thu, 19-Oct-2017

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