Handbook of Institutional Approaches to International Business
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Handbook of Institutional Approaches to International Business

Edited by Geoffrey Wood and Mehmet Demirbag

Expertly written by leading scholars from a range of different starting points, this compendium presents a synthesis of recent work relating to institutionally-informed accounts from transitional and emerging markets, as well as from mature economies. It specifically focuses on the linkage between institutions and what goes on inside firms, and the relationship between setting, strategic choice and systemic outcomes.
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Chapter 11: The Multinational Enterprise, Institutions and Corruption

Martina McGuinness and Mehmet Demirbag


Martina McGuinness and Mehmet Demirbag 11.1 INTRODUCTION Why should we be interested in examining institutions in international business research? Quite simply, institutions matter. Institutions are central features of the context within which firms make decisions about every aspect of organizational life. Organizations are not hermetically sealed entities. More problematically, but also more interestingly, they represent open systems existing within a wider environmental context comprising of a range of institutions, influences and actors which often exert different, and sometimes conflicting pressures upon the organization. The focus for this chapter is upon institutions from the perspective of the multinational enterprise (MNE). Specifically, we explore the topic of corruption and the impact that this has upon the MNE. It is impossible to address the issue without understanding corruption as an attribute of the institutional environment within which the MNE operates. As such, any discussion of corruption must first begin by reviewing institutional perspectives. In this way, it shall be made clear to the reader why, exactly, institutions matter and what might be the implications for the MNE facing the challenge posed by corruption. 11.2 INSTITUTIONAL THEORY AND THE MNE The influence that institutions exert upon international business activity has long been recognized (Hymer 1976; North 1991, 1990). The actions of actors, particularly state actors, can affect the structure and operation of the markets within which firms operate. Institutions are ‘the rules of the game’ (North 1990, 3). More specifically: Institutions provide the framework within which human beings interact. They establish the cooperative and...

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