Dynamics of Pro-Market Institutions and Firm Performance

Banalieva, E., Cuervo-Cazurra, A., Sarathy, R. 2018. Dynamics of Pro-Market Institutions and Firm Performance. Journal of International Business Studies, 49 (7): 858-880.

40 Pages Posted: 27 Dec 2018

See all articles by Elitsa R. Banalieva

Elitsa R. Banalieva

Northeastern University; Northeastern University - International Business & Strategy

Alvaro Cuervo-Cazurra

Northeastern University - Department of International Business and Strategy

Ravi Sarathy

Northeastern University - International Business & Strategy

Multiple version iconThere are 2 versions of this paper

Date Written: October 21, 2018

Abstract

We analyze how pro-market institutions affect firm performance in emerging markets. Integrating transaction costs and signaling theory, we advance three arguments. First, we separate four dynamic components of pro-market institutions: intensifying and fading pro-market reforms and intensifying and fading pro-market reversals. Second, we propose an asymmetric dynamic view whereby not only intensifying reforms but also fading reversals improve firm performance, while not only fading reforms but also intensifying reversals reduce performance. Finally, we argue that more efficient firms perform better under each of the dynamics. We test these arguments on a sample of 1092 firms from 34 emerging markets during 1998-2011.

Keywords: pro-market institutions, pro-market reversals, pro-market reforms, institutional economics, transaction costs, signaling theory, efficiency, performance, emerging markets

JEL Classification: F23

Suggested Citation

Banalieva, Elitsa R. and Cuervo-Cazurra, Alvaro and Sarathy, Ravi, Dynamics of Pro-Market Institutions and Firm Performance (October 21, 2018). Banalieva, E., Cuervo-Cazurra, A., Sarathy, R. 2018. Dynamics of Pro-Market Institutions and Firm Performance. Journal of International Business Studies, 49 (7): 858-880.. Available at SSRN: https://ssrn.com/abstract=3298229

Elitsa R. Banalieva

Northeastern University ( email )

360 Huntington Ave
315 C Hayden Hall
Boston, MA 02115
United States

Northeastern University - International Business & Strategy ( email )

Boston, MA 02115
United States

Alvaro Cuervo-Cazurra (Contact Author)

Northeastern University - Department of International Business and Strategy ( email )

D'Amore-McKim School of Business
313 Hayden Hall, 360 Huntington Avenue
Boston, MA 02115
United States
16173736568 (Phone)
16173738628 (Fax)

HOME PAGE: http://cuervo-cazurra.com

Ravi Sarathy

Northeastern University - International Business & Strategy ( email )

Boston, MA 02115
United States

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