How Multinationals Sustain and Legitimize in dysfunctional institutional Context: The Influence of firm Heterogeneity, institutional context and Local Partnership

Research has identified a range of responses by foreign firms to institutional voids, but has not analyzed how and why particular firms respond the way that they do. We draw on the comparative capitalisms literature and adopt a critical realist perspective to develop theory abductively. We examine two multinationals from the same industry, but contrasting institutional environments that work with local organizations in Bangladesh. We reveal how their ownership and control structures (Type of Governance supporting long-term or short-term orientation), host-country institutions and their firm-specific host-country contexts shape their responses (e.g. Degree of local collaboration and the Degree of Support from Firm-Specific Host-Country Institutions for a Long-Term Approach), enabling us to put forward propositions that will help to explain firms’ variable responses to the same institutional void. By linking home-country institutional mechanisms to strategic responses within a specific context and highlighting the importance of firms’ fundamental, institutionally conditioned diversity, we contribute to the emerging research on the interactions between institutions, firms, and strategy.