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

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  • Sheila Puffer

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  • Daniel McCarthy
  • Alfred Jaeger
  • Denise Dunlap

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

Suggested Citation

  • Sheila Puffer & Daniel McCarthy & Alfred Jaeger & Denise Dunlap, 2013. "The use of favors by emerging market managers: Facilitator or inhibitor of international expansion?," Asia Pacific Journal of Management, Springer, vol. 30(2), pages 327-349, June.
  • Handle: RePEc:kap:asiapa:v:30:y:2013:i:2:p:327-349 DOI: 10.1007/s10490-012-9299-3
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    References listed on IDEAS

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    Cited by:

    1. Yan Li & Fiona Yao & David Ahlstrom, 2015. "The social dilemma of bribery in emerging economies: A dynamic model of emotion, social value, and institutional uncertainty," Asia Pacific Journal of Management, Springer, vol. 32(2), pages 311-334, June.
    2. Conti, Claudio Ramos & Parente, Ronaldo & de Vasconcelos, Flávio C., 2016. "When distance does not matter: Implications for Latin American multinationals," Journal of Business Research, Elsevier, vol. 69(6), pages 1980-1992.
    3. Malay Biswas, 2017. "Are They Efficient in the Middle? Using Propensity Score Estimation for Modeling Middlemen in Indian Corporate Corruption," Journal of Business Ethics, Springer, pages 563-586.
    4. 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, pages 433-446.
    5. 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.
    6. David Ralston & Carolyn Egri & Charlotte Karam & Irina Naoumova & Narasimhan Srinivasan & Tania Casado & Yongjuan Li & Ruth Alas, 2015. "The triple-bottom-line of corporate responsibility: Assessing the attitudes of present and future business professionals across the BRICs," Asia Pacific Journal of Management, Springer, pages 145-179.

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