The Role of Informal Institutional Risks on Firm Performance in Emerging Market Economies
This study aims at empirically examining the effects of informal institutional risks on the performance of more than 12000 firms in 39 emerging market economies. This study examines the influence of informal institutional risks, along five dimensions of cultural values, on firm performance. The results reveal that different cultural dimension have differential effects on firm performance. The findings show that while long-term orientation cultural value positively promote firm performance, other cultural values such as uncertainty avoidance, individualistic and masculinity negatively affect performance of firm in emerging market. However, the study further reveals when quality of informal institutions are measured by the extracted two-unique (uncorrelated) cluster cultural measure and alternatively by social capital they all have positive influence on firm performance. This highlights and provides caution on past research not to oversimplify on the roles play by different cultural values in influencing firm performance in emerging markets. They can have unique combined influence on firm performance which firm managers should take into account when devising strategies to boost the performance of their firms.
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