The impact of market based institutional reforms on firm strategy and performance: Review and extension

Market based institutional reforms across the globe have led to massive improvements in business conditions and have contributed to unprecedented rates of cross-border business activities. Scholars have tried to understand the implications of such reforms and have amassed a significant body of work in this area, but analysis of this literature highlights some deficiencies limiting its impact. A primary issue is the fragmentation of this work across different disciplines and the use of different terminology even in the business literature, leading to disconnected conversations and limited progress on the topic. The purpose of this article is two-fold: (1) provide a systematic review of the literature on the effect of market based institutional reforms on firm strategy and performance, and (2) propose a future research agenda. We argue that employing an aggregate perspective, as opposed to one focusing on individual reform subcomponents, provides a more comprehensive understanding of their systemic implications. We use this approach to analyze extant work on the implications of reforms including both direct effects on firm strategy and performance and various contingences such as location, time, institutional legacies, and global organizations. To summarize our two objectives, we develop two graphical models – one depicting the current state of the literature and the other highlighting possible theoretical additions for future research.