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Publication
Institutional quality, firm performance and business groups: evidence from emerging economies
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Authors
Abstract(s)
Firms face numerous challenges while doing their business operations and one of
the biggest challenges is to deal with the conditions of the institutional environment. In this
study I analyse how the quality of the institutional environment influences firm performance
in emerging economies. More exactly, this study develops a comprehensive conceptual
model of six hypothesized relationships between the quality of the three institutional
dimensions proposed by Scott (1995) (regulatory, normative and cognitive) and firm
performance. Besides, it also examines the moderating effect of group affiliation on firm
performance when institutional quality is low. The model is designed through a linear
regression using a sample of 5.166 firms from 19 emerging economies to test the theoretical
hypotheses. The findings indicate that lower regulatory and normative quality will lead to
lower firm performance. The results also show that the moderating effect of group affiliation
has a positive impact on firm performance only when regulatory quality of the institutional
environment is low. Considering the effect of institutions and group affiliation on
performance, this study contributes to our understanding of how firms from countries with
lower institutional quality, that are more likely to face difficulties, can prepare themselves
by building a theory that is context-specific.
Description
Keywords
Institutional theory Firm performance Business groups Emerging economies