An Evolutionary Approach to Understanding International Business Activity: The Co-Evolution of MNEs and the Institutional Environment
Journal of International Business Studies, Vol. 41, No. 4, pp. 567-86, 2010 (this version is longer than the published paper)
46 Pages Posted: 12 Oct 2009 Last revised: 13 Oct 2010
Date Written: April 15, 2009
This paper examines the co-evolution of MNE activities and institutions external and internal to the firm. We develop a theoretical framework for this analysis which draws on the more recent writings of Douglass North on institutions as a response to complex forms of uncertainty associated with the rise in global economic interconnectedness, and of Richard Nelson on the co-evolution of technology and institutions. We link historical changes in the character of MNE activities to changes in the institutional environment, and highlight the scope for firm level creativity and institutional entrepreneurship that may lead to co-evolution with the environment. We argue that the main drivers for institutional entrepreneurship are now found in the increasing autonomy of MNE subsidiaries. Thus MNE agency derives from more decentralized forms of experimentation in international corporate networks, which competence-creating nodes of new initiatives can co-evolve with local institutions. Unlike in most other streams of related literature, our approach connects patterns of institutional change in wider business systems with more micro processes of variety generation and experimentation within and across individual firms. This form of co-evolutionary analysis is increasingly important to understanding the interrelationships between MNE activities and public policy.
Keywords: Theory of FDI and the MNE, Institutional Theory, Evolutionary Economics, Historical Adaptation
JEL Classification: F23, M21, B25, N8
Suggested Citation: Suggested Citation