Multinational Enterprises’ Responses to Institutional Voids

The existing literature on multinationals’ responses to institutions in emerging markets draws either on transaction-cost economics, often focusing on supposed ‘institutional voids’, or a comparative capitalisms (CC) approach. The former largely neglects particular multinationals’ strategies. The latter tends to examine multinationals’ efforts to re-create key competencies abroad, downplaying firms’ other activities. We draw on, and extend, the CC literature, examining how two multinationals in the same industry, but from contrasting institutional systems, respond to Bangladesh’s medical system. Neither company attempts to develop medicines in Bangladesh, but both wish to increase the supply of their products. We highlight the influence of institutionally conditioned firm heterogeneity on firm responses. We extend the CC literature by revealing how institutionally conditioned mechanisms, such as company values and product- and geographical-market choices, both enact and re-produce institutions. These mechanisms shape multinationals’ level of partnership with local organizations and, hence, their ability to improve health-related outcomes.