Navigating Institutional Voids: A case study on the role of institutions on entry mode choice for Danish firms within the Indian water sector

Petur Mortensen

Student thesis: Master thesis

Abstract

Motivated by Danish interest in the Indian water market and a growing academic attention to emerging markets’ entry modes, this thesis sets out to examine entry mode determinants of Danish water firms in India. In response to inconclusive and contradictory findings, and hence appeals for future studies addressing how the institutional context affects firms’ entry mode choices – especially in conjunction with the resource-based view and in emerging markets – this thesis aims at complementing this research gap. This is done through a multi-theoretical framework with a particular focus on the role of market intermediaries – in effect, expanding current multi-theoretical approaches with a distinct view on the role of market intermediaries in reconciling or exacerbating the state of institutional voids and the subsequent effect on entry mode choice. The theoretical framework is subsequently applied, through a multiple case study, to three case firms and three sector experts within the Danish water industry in India. The findings indicate that a focus on market intermediaries reveals pertinent entry mode determinants, such as access to reliable sectorial information and functioning labour markets, which would be left unidentified through a traditional institutional approach. Effective market intermediaries seem to function as purveyors or providers of the knowledge needed to effectively navigate a market wrought with institutional weaknesses – a domain otherwise tacitly bound to local firms. Consequently, firms can reduce external uncertainty through the aid of market intermediaries, while still limiting internal uncertainty through a wholly-owned subsidiary (WOS) mode of entry in markets with significant institutional voids. As a result, effective market intermediaries seem to increase the likelihood of entering a market through a WOS. Nonetheless, a prerequisite of a successful entry – especially a WOS mode of entry in an institutionally distant country – seems to be strong firm resources. Consequently, it is within the interplay between firm and institutional variables that an entry mode is decided, while market intermediaries determine the tacitness of the required local knowledge, and thus the dependence on partnering with local firms. Hence, if the findings are substantiated further, researchers and managers alike should consider employing multi-theoretical approaches to entry mode choice and take into consideration the effect of market intermediaries. This could increase the explanatory power to entry mode choice for researchers and aid managers’ entry mode selection. Keywords: Institutions, institutional voids, institutional theory, entry mode choice, resource-based view of the firm, transaction cost theory, market intermediaries, asset specificity, internal and external uncertainty.

EducationsMSc in International Business and Politics, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2015
Number of pages89