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The use of favors by emerging market managers: Facilitator or inhibitor of international expansion?

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  • Sheila Puffer

    ()

  • Daniel McCarthy
  • Alfred Jaeger
  • Denise Dunlap
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    Abstract

    This article explores the use of favors by emerging market managers, the impact of using favors on their firms’ growth, legitimacy, and reputation in a variety of business environments, and how the use of favors affects firms’ paths to international expansion. We discuss the concept of favors, and to illustrate the process of favors, we look at culturally rooted examples of their use by managers from the BRIC countries of Brazil, Russia, India, and China. Utilizing neo-institutional theory, we create a typology of four types of environments in which managers and firms from emerging markets conduct business with various relational entities (e.g., governments, customers, suppliers, competitors, alliance partners). We posit that the use of favors by managers compensates for the relatively weak legitimacy of formal institutions in emerging market environments, with favors illustrating the resulting reliance upon informal cultural-cognitive institutions. We develop propositions regarding the impact of the use of favors on the organizational outcomes of growth, legitimacy, and reputation of emerging market firms doing business in each of the four environments. This leads to further propositions regarding how the use of favors can influence their firms’ internationalization growth paths. We conclude that the impact of favors on international growth paths results from the fit or non-fit of their use with the level of legitimacy of the formal institutional environment of the focal relational entity in various business transactions. Copyright Springer Science+Business Media, LLC 2013

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    File URL: http://hdl.handle.net/10.1007/s10490-012-9299-3
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    Bibliographic Info

    Article provided by Springer in its journal Asia Pacific Journal of Management.

    Volume (Year): 30 (2013)
    Issue (Month): 2 (June)
    Pages: 327-349

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    Handle: RePEc:kap:asiapa:v:30:y:2013:i:2:p:327-349

    Contact details of provider:
    Postal: P.O. Box 17, 3300 AA Dordrecht, the Netherlands
    Web page: http://www.springerlink.com/link.asp?id=106589

    Related research

    Keywords: Favors; Emerging market firms; International expansion; Institutional theory; Relational entity;

    References

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    Cited by:
    1. Kiran Ismail & David Ford & Qingsheng Wu & Mike Peng, 2013. "Managerial ties, strategic initiatives, and firm performance in Central Asia and the Caucasus," Asia Pacific Journal of Management, Springer, vol. 30(2), pages 433-446, June.
    2. Sheila Puffer & Daniel McCarthy & Mike Peng, 2013. "Managing favors in a global economy," Asia Pacific Journal of Management, Springer, vol. 30(2), pages 321-326, June.

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