Institutions and emerging markets: effects and implications for multinational corporations

Purpose - – The purpose of this paper is to discuss the role of institutions in emerging markets by sketching out the unique institutional features of these markets and their implications for multinational corporations (MNCs). Design/methodology/approach - – The study is conceptual in nature and provides an examination and interrelation of some of the key developments of institution-based research in the context of emerging market studies. Findings - – This paper examines several idiosyncratic institutional features of emerging markets, including institutional voids, the relative importance of informal compared to formal institutions, institutional pressures by local governments, as well as institutional change and transitions. Practical implications - – The paper discusses key effects and implications of the unique institutional environments of emerging markets for managers of MNCs, such as the relevance and importance of context, political, economic and social adaptability, as well as institutional arbitrage. Social implications - – The paper discusses institutional legitimacy pressures in emerging markets for MNCs’ social performance, the relevance and importance of social institutions in these markets, as well as the need for social adaptation in order to successfully do business in emerging markets. Originality/value - – This paper provides a current and relevant discussion of the key formal and informal institutional idiosyncrasies of emerging markets compared to developed markets and forwards a number or practical prescriptions for how to navigate these different and unique institutional environments.