Title: Institutional misalignment and cost of doing business abroad: a varieties of capitalism approach

Authors: Kim Clark; Indu Ramachandran

Addresses: Management Department, School of Economics and Business Administration, Saint Mary's College of California, 1928 Saint Mary's Road, Moraga, CA 94556, California, USA ' Department of Management, McCoy College of Business Administration, Texas State University, 601 University Drive, San Marcos, TX 78666, USA

Abstract: Cost of Doing Business Abroad (CDBA) and the variety of causes leading to this phenomenon have remained an important research stream in International Business. In this paper, we set forth a new perspective on the CDBA by incorporating institutional misalignment between the home and the host country as a component of the CDBA. Through the lens of Varieties of Capitalism from political economics, we develop an integrated set of propositions to describe why and how institutional misalignment can create additional cost for multinational enterprises (MNEs). Specifically, we discuss how the differences in institutional configurations between the home and the host country create institutional misalignment. Furthermore, we theorise why institutional misalignment is inevitable as MNEs cross national borders and how this creates additional economic as well as social costs for MNEs.

Keywords: cost of doing business abroad; institutional misalignment; varieties of capitalism; business systems.

DOI: 10.1504/EJIM.2020.107627

European Journal of International Management, 2020 Vol.14 No.4, pp.753 - 774

Received: 25 Apr 2018
Accepted: 27 Apr 2018
Published online: 02 Jun 2020 *

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