How Firms Respond to Institutional Differences: Antecedents and coping mechanisms for liberal and coordinated market economies

Elsa Maria Sternbauer

Student thesis: Master thesis

Abstract

This thesis sheds light on the question concerning how multinational corporations can successfully operate across borders despite institutional differences. The interaction between the institutional context of the home country and the development of organizational capabilities that lead towards a firm-specific advantage is emphasized. Varieties of Capitalism literature serves as a basis for the analysis of institutions and countries, due to its classification of Western economies into liberal and coordinated market economies. The modalities of the transfer of organizational capabilities and corresponding coping mechanisms are explored through a comparative case study. By selecting two firms based in Germany, thirteen interviews were conducted and findings are put in a framework that reveals three different types of coping mechanisms. General coping mechanisms are applied by multinational corporations irrespective of antecedents. Firms develop context-specific coping mechanisms for liberal and coordinated market economies. With the comparison of global and multinational strategies of firms, it was detected that firms with a high level of location-bound organizational capabilities are more likely to develop distinctive coping mechanisms than firms with a low level of location-bound organizational capabilities. The findings yield an important theoretical insight for MNCs and enrich the Varieties of Capitalism literature, institutional theory and academic works in organizational capabilities. Keywords: Institutions, Varieties of Capitalism, multinational corporations, organizational capabilities, location capability, global integration, local responsiveness, coping mechanisms, comparative case study

EducationsMSc in International Business and Politics, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2014
Number of pages92