The Impact of Formal Institutional Risks on Firm Performance in Emerging Market Economies

Zukarnain Zakaria, Laleh Ardalan


The aim of this study is to empirically reconcile the impact of formal aspects of host countries’ institutional risks on the performance of multinational firms in emerging economies. In addition, this research seeks to provide a comparative study on formal institutions focusing on both aggregate and selected disaggregate core aspects of formal institutions is relied upon to assess their impacts on firm performance in emerging economies. In this study, the measures of qualities of formal institutions are collected from World Bank’s Enterprise Survey (WBES). Through consistence empirical examinations, the research has met its objective in analyzing formal institutional risks as well as it's interaction effect on the performance of firms in emerging market economies.


International Business School, Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia

Full Text:

Abstract PDF


Acemoglu, D., & Johnson, S. (2005). Unbundling Institutions. Journal of Political Economy, 113(5), 949-995.

Acemoglu, D., Johnson, S., & Robinson, J. A. (2002). Reversal of fortune: Geography and institutions in the making of the modern world income distribution. The Quarterly Journal of Economics, 117(4), 1231-1294.

Acemoglu, D., Johnson, S., Robinson, J., & Thaicharoen, Y. (2003). Institutional causes, macroeconomic symptoms: volatility, crises and growth. Journal of monetary economics, 50(1), 49-123.

Byrne, G. J., & Bradley, F. (2007). Culture's influence on leadership efficiency: How personal and national cultures affect leadership style. Journal of Business Research, 60(2), 168-175.

Gomez-Mejia, L. R. (1984). Effect of Occupation on Task Related, Contextual, and Job Involvement Orientation: A Cross-Cultural Perspective. Academy of Management Journal, 27(4), 706-720.

Griffith, D. A., Cavusgil, S. T., & Xu, S. (2008). Emerging themes in international business research. Journal of International Business Studies, 39(7), 1220-1235.

Hall, R., & Jones, C. (1999). Why do some countries produce so much more output per worker than others? Quarterly Journal of Economics, 114(February), 83-116.

Henisz, W., & Swaminathan, A. (2008). Introduction: Institutions and International Business. Journal of International Business Studies, 39(4), 537-539.

Kanagaretnam, K., Lim, C. Y., & Lobo, G. J. (2011). Effects of national culture on earnings quality of banks. Journal of International Business Studies, 42(6), 853-874.

Keillor, B. D., Wilkinson, T. J., & Owens, D. (2005). Threats to international operations: dealing with political risk at the firm level. Journal of Business Research, 58(5), 629-635.

Kirkman, B. L., Lowe, K. B., & Gibson, C. B. (2006). A quarter century of culture's consequences: A review of empirical research incorporating Hofstede's cultural values framework. Journal of International Business Studies, 37(3), 285-320.

Knack, S., & Keefer, P. (1995). Institutions and economic performance: Cross-country tests using alternative institutional measures. Economics and Politics, 7, 207-227.

Lessard, D., & Lucea, R. (2009). Embracing risk as a core competence: The case of CEMEX. Journal of International Management, 15(3), 296-305.

Li, H., Meng, L., Wang, Q., & Zhou, L. A. (2008). Political connections, financing and firm performance: Evidence from Chinese private firms. Journal of Development Economics, 87(2), 283-299.

Li, J., Chu, C. W. L., Wang, X., Zhu, H., Tang, G., & Chen, Y. (2012). Symbiotic ownership, cultural alignment, and firm performance: A test among international strategic alliances. International Business Review, 21(6), 987-997. doi: 10.1016/j.ibusrev.2011.11.004

López-Duarte, C., & Vidal-Suárez, M. M. (2010). External uncertainty and entry mode choice: Cultural distance, political risk and language diversity. International Business Review, 19(6), 575-588.

Meschi, P. X., & Riccio, E. L. (2008). Country risk, national cultural differences between partners and survival of international joint ventures in Brazil. International Business Review, 17(3), 250-266.

Miller, K. D. (1992). A framework for integrated risk management in international business. Journal of International Business Studies, 311-331.

North, D. C. (1990). Institutions, institutional change, and economic performance: Cambridge Univ Pr.

North, D. C. (1994). Economic performance through time. The American economic review, 84(3), 359-368.

Peng, M. W., Wang, D. Y., & Jiang, Y. (2008). An institution-based view of international business strategy: A focus on emerging economies. Journal of International Business Studies, 39(5), 920-936.

Rothaermel, F. T., Kotha, S., & Steensma, H. K. (2006). International market entry by US internet firms: An empirical analysis of country risk, national culture, and market size. Journal of Management, 32(1), 56-82.

Sanchez-Peinado, E., & Pla-Barber, J. (2006). A multidimensional concept of uncertainty and its influence on the entry mode choice: An empirical analysis in the service sector. International Business Review, 15(3), 215-232.

Slangen, A. H. L., & van Tulder, R. J. M. (2009). Cultural distance, political risk, or governance quality? Towards a more accurate conceptualization and measurement of external uncertainty in foreign entry mode research. International Business Review, 18(3), 276-291.

Sufian, F., & Habibullah, M. S. (2010). Does economic freedom fosters banks’ performance? Panel evidence from Malaysia. Journal of Contemporary Accounting & Economics, 6(2), 77-91.

Venaik, S., & Brewer, P. (2010). Avoiding uncertainty in Hofstede and GLOBE. Journal of International Business Studies, 41(8), 1294-1315.

Wan, W. P., & Hoskisson, R. E. (2003). Home country environments, corporate diversification strategies, and firm performance. Academy of Management Journal, 46(1), 27-45.


  • There are currently no refbacks.

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.