THE THIRD LEG IN THE STRATEGY TRIPOD – Institutional Based View

Introduction

Strategy has come to play a significant role in international business (IB) in recent times. This is predicated on the fact of complexities associated with globalisation. The interplay of various factors of production in an environment could have been sufficient for MNEs in taking investment decisions. However, experience has shown otherwise. In this light, strategising in the international business arena has been dominated by industry and resource based views, somewhat ignoring the magnitude of institutional impact on investment decisions.

EVALUATION OF ‘THE THIRD LEG IN THE STRATEGY “TRIPOD”’

According to Peng et al (2008), citing Porter(1980)
Trade barriers have come to play important roles in IB strategies. Countries in protecting their local business players against foreign competition usually set up institutional policies aimed at stemming imports by foreign MNEs. These MNEs are alleged to compete unfavourably through the process of dumping. Davis (2009) citing the 1947 GATT agreement defines dumping as a situation where goods originating from a country are imported into another country at less than normal values. The use of anti-dumping laws by developed countries against MNEs from developing countries is a good example of how an institutional policy could be a tool of trade barrier in IB. Western countries have used this tool of protectionism against competition from Asia quite effectively. The issue here is that when market-based forces fail, antidumping laws could be deployed by local firms to ward off MNEs, thus firming the position of institutional based view as the third leg in the IB strategy tripod.

Governing The Corporation In Emerging Economies

Corporate governance is highly a determinant in firm performance in developed countries. This is due to the fact that the agency theory focuses on separation of ownership and control. These are exemplified by principal-manager conflicts (Peng et al 2008) quite unlike a lot of emerging economies where principal-principal conflict is the norm. The ability of an MNE to invest in such an environment would mean understanding the value and