IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

The three pillars of institutional theory and FDI in Latin America: An institutionalization process

  • Trevino, Len J.
  • Thomas, Douglas E.
  • Cullen, John
Registered author(s):

    This paper describes the process of institutionalization and legitimization in countries in Latin America and its impact on organizational decision-making regarding inward foreign direct investment (FDI). It argues that institutionalization is a process that works through all three pillars--cognitive, normative, and regulative--and that this process can legitimize a host market for foreign investors. The study examines institutional reform in 16 Latin American countries using several indices of institutional change occurring between 1970 and 2000. Results indicate that institutional processes that legitimize more effectively through the cognitive and normative pillars (e.g. educational attainment, bilateral investment treaties, privatization, and political uncertainty) are better indicators of inward FDI than those that legitimize primarily through the regulative pillar (e.g. tax reform, trade reform, and financial account liberalization).

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 17 (2008)
    Issue (Month): 1 (February)
    Pages: 118-133

    in new window

    Handle: RePEc:eee:iburev:v:17:y:2008:i:1:p:118-133
    Contact details of provider: Web page:

    Order Information: Postal:

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    2. Robert Grosse & Len J Trevino, 1996. "Foreign Direct Investment in the United States: An Analysis by Country of Origin," Journal of International Business Studies, Palgrave Macmillan, vol. 27(1), pages 139-155, March.
    3. Klaus E Meyer, 2001. "Institutions, Transaction Costs, and Entry Mode Choice in Eastern Europe," Journal of International Business Studies, Palgrave Macmillan, vol. 32(2), pages 357-367, June.
    4. Sobel, Andrew C., 2002. "State institutions, risk, and lending in global capital markets," International Business Review, Elsevier, vol. 11(6), pages 725-752, December.
    5. Oxley, Joanne E., 1999. "Institutional environment and the mechanisms of governance: the impact of intellectual property protection on the structure of inter-firm alliances," Journal of Economic Behavior & Organization, Elsevier, vol. 38(3), pages 283-309, March.
    6. Trevino, Len J. & Grosse, Robert, 2002. "An analysis of firm-specific resources and foreign direct investment in the United States," International Business Review, Elsevier, vol. 11(4), pages 431-452, August.
    7. Sethi, Deepak & Guisinger, Stephen & Ford, David L. & Phelan, Steven E., 2002. "Seeking greener pastures: a theoretical and empirical investigation into the changing trend of foreign direct investment flows in response to institutional and strategic factors," International Business Review, Elsevier, vol. 11(6), pages 685-705, December.
    8. Oded Shenkar & Mary Ann von Glinow, 1994. "Paradoxes of Organizational Theory and Research: Using the Case of China to Illustrate National Contingency," Management Science, INFORMS, vol. 40(1), pages 56-71, January.
    9. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
    10. Bailey, Warren & Chung, Y. Peter, 1995. "Exchange Rate Fluctuations, Political Risk, and Stock Returns: Some Evidence from an Emerging Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(04), pages 541-561, December.
    11. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
    12. repec:tpr:qjecon:v:106:y:1991:i:4:p:1191-217 is not listed on IDEAS
    13. Kenneth A. Froot & Jeremy C. Stein, 1989. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," NBER Working Papers 2914, National Bureau of Economic Research, Inc.
    14. Eva Paus & Nola Reinhardt & Michael Robinson, 2003. "Trade Liberalization and Productivity Growth in Latin American Manufacturing, 1970-98," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 6(1), pages 1-15.
    15. Mudambi, Ram & Navarra, Pietro, 2002. "Institutions and internation business: a theoretical overview," International Business Review, Elsevier, vol. 11(6), pages 635-646, December.
    16. Bevan, Alan & Estrin, Saul & Meyer, Klaus, 2004. "Foreign investment location and institutional development in transition economies," International Business Review, Elsevier, vol. 13(1), pages 43-64, February.
    17. Trevino, Len J. & Daniels, John D., 1995. "FDI theory and foreign direct investment in the United States: a comparison of investors and non-investors," International Business Review, Elsevier, vol. 4(2), pages 177-194, June.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:iburev:v:17:y:2008:i:1:p:118-133. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.