MNE Institutional Advantage: How Subunits Shape, Transpose and Evade Host Country Institutions

Scholars increasingly emphasize the impact of institutions on multinational enterprises (MNEs), but the opposite relationship has attracted less research – that is, MNE agency in relation to institutions. Based on a comparative case study of six MNEs from the United States and Sweden, this paper remedies this. It explores and explicates MNE subunits’ strategic responses to host country institutional constraints and opportunities in five different regions. A new-institutional approach is adopted, which allows for an investigation of MNE subunit agency in relation to normative and cognitive institutions, as well as regulative ones. This fine-grained analysis reveals not only what kinds of responses MNE subunits invoke, but why and how they are able to respond. We identify four strategic responses by which subunits shape, transpose and evade institutions in the pursuit of competitive advantage: Innovation, Arbitrage, Circumvention and Adaptation. These responses are driven by three key enablers: multinationality, foreignness and institutional ambiguity – that serve to enhance and heighten three mechanisms: reflexivity, role expectations and resources. By linking the enablers and the mechanisms to specific types of strategic responses in a framework and typology, the paper not only contributes to emerging research on the interplay between MNEs, institutions and strategy, but to strategy practice.