Institutional Environment and MNEs’ Strategy in Transitional China

Yongqiang Gao
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Yongqiang Gao: Huazhong University of Science and Technology, China

Managing Global Transitions, 2008, vol. 6, issue 1, 5-21

Abstract: MNEs face a complex institutional environment when doing business in the international market. As a result, MNEs adopt strategies to deal with the institutional pressures. However, present studies seldom discuss the institutional environment of a given country, specifically China. Therefore, the strategies that MNEs can use to cope with the institutions in China are far from being discussed. This study contributes to making up this gap. In this study, the identified important institutions in China are Chinese culture, governmental system, and non-governmental organizations (NGOs). They exert coercive and normative pressures on the operations of MNEs. Four strategies can be selected by MNEs to deal with the institutional pressures: guanxi strategy, commitment strategy, competitive strategy and leverage strategy. Guanxi strategy and commitment strategy are commonly used to build good guanxi with Chinese governors and NGOs. Competitive strategy is used when MNEs have high bargaining power against Chinese governments, while leverage strategy is used MNEs in setting conflicts between different institutions or parties to resist the unfavorable pressures from institutions in China.

Keywords: China; institutional theory; institutional environment/pressure; multinational enterprise (MNE) (search for similar items in EconPapers)
JEL-codes: F23 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (1)

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