Edited by Geoffrey Wood and Mehmet Demirbag
Chapter 10: Beyond the ‘Rules of the Game’: Three Institutional Approaches and How They Matter for International Business
Jasper J. Hotho and Torben Pedersen 10.1 INTRODUCTION A recurring question in international business (IB) research is how institutions matter for IB activity (Henisz and Swaminathan 2008; Eden 2010). The value of institutional thought to understanding international business is increasingly recognized and the use of institutional arguments has risen considerably in recent years. Yet what institutions are and how they impact upon the behaviour of international firms often remains unclear. This is partially because terms such as ‘institutions’, ‘institutional distance’ and ‘institutional theory’ mask the wide variety of institutional approaches that are currently used in international business research. In line with its interdisciplinary nature, international business research draws on institutional approaches from various disciplines, such as economics, sociology and political economy. However, the IB field often seems to lack awareness of the differences among the various takes on institutional theory and their respective explanatory powers. This is problematic because the various institutional approaches differ considerably in terms of their conceptualizations of institutions, their levels of analysis and, ultimately, their explanations of how institutions matter for international business. For instance, views on whether and how institutions affect international firm behaviour differ greatly depending on whether institutions are conceived of as formal rules and regulations, or as shared regulative, normative and cognitive frames. In other words, a discussion of institutions without further specification almost guarantees confusion, at least in an international business context. The implication is that to further our understanding of ‘how institutions matter’ for international business, it is important to...
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