The Institutional Embeddedness of International Business Strategy

Abstract

U.S. managers and business academics alike have been slow to recognize some of the fundamental differences between domestic and international industrial competition. This article examines one particularly salient difference, the role of national institutional systems in shaping economic action across national markets. The article initially reviews four relevant bodies of literature on competitive strategy and international competition and finds that, despite progress in this direction, none of them adequately account for the institutional embeddedness of corporate strategy. The nature of national institutional systems and their impact on international business strategies are then theoretically described. Finally, some fundamental strategic implications of the institutional embeddedness approach are explored for U.S. firms.