Strategic Responses to Institutional Voids (Rationalization, Aggression, and Defensiveness): Institutional Complementarity and Why the Home Country Matters

We seek to understand how the strategic responses of firms to institutional voids are affected by their home countries’ institutional contexts. It adopts an exploratory, multiple case studies approach examining the responses of advanced and emerging multinational enterprises, and local firms in two African countries which are characterized by such voids, namely the Democratic Republic of the Congo and Zimbabwe. Our research suggests that firms’ strategic responses to institutional voids in emerging or developing markets are affected by the home country’s institutional environment and firms’ experiences and advantages arising from that home context. Firms adopt strategic responses which reflect their respective advantages and this results in diverse approaches based on the interplay between capitalizing upon internal resources and institutional know-how. For some firms this may result in a defensive strategic response, whilst for others opportunistic and aggressive agility, or rationalization and reconciliation may manifest. We demonstrate differences between advanced and emerging multinational enterprises and domestic firms covering the spectrum between institutional outsiders and insiders. We emphasize the contextual nature of these strategic responses and argue that this requires integrating both a resource and institution-based analysis of firms’ underlying advantages and how they are able to leverage off these advantages in institutionally voided environments. Practical implications arise for doing business in emerging and developing markets.