Multinational Corporations' Interactions with Host Institutions: Taking Stock and Moving Forward. (RESEARCH ARTICLE)

1 Introduction

The relationship between institutions and multinational corporations (MNCs) is a main theme of international business (IB) research (Kostova et al., 2008). Prior work tends to explore how the institutional environment impacts on firm behaviour (Xu et al., 2021) or how MNCs can engage in agency vis-a-vis institutions (Saka-Helmhout, 2020). Still missing is a mapping of research on the interactions between MNCs and their host environments. This omission is important because organisational and institutional levels are interdependent (Becker-Ritterspach et al., 2019). In line with institutional research (Jackson & Deeg, 2008; Oliver, 1991), we define interaction as a process of mutual engagement between MNCs and host-country institutions, which entails an organisation's strategic response to demands of the institutional environment.

Prior findings are inconclusive on whether proactive or reactive forms of engagement with host institutions benefit a focal MNC. For example, one persisting question is whether adaptation and conformity to local institutional pressures lead to better outcomes than nonadaptation, defiance, or even efforts to change institutions to align them more closely with organisational norms and best practices (Kostova et al., 2008; Rosenzweig & Singh, 1991). Furthermore, despite tentative unearthing of the institutional and organisational factors shaping engagement with institutions by MNCs and their subsidiaries (e.g., Song, 2022), the literature lacks more systematic mapping across individual studies to reveal patterns and pathways of MNC-institution interactions.

Our study addresses this important gap by examining the following research question: What does existing literature reveal about interactions between MNCs and host-country institutions? We review 176 articles published in leading journals during 1991-2022, leveraging the 'Antecedents-Phenomenon-Consequences' model (Pisani & Ricart, 2016) to organise our review. Specifically, we examine what the literature says about MNCs' motivation to interact with host institutions and the nature of the host-market context as antecedents; what strategy is being implemented and by which actors as the phenomenon; and what the outcomes are as consequences. This enables us to offer texture to the classical question of what types of engagement with host institutions benefit firm-level outcomes. Our review suggests that while the interaction strategy bringing MNCs the most positive outcomes depends on the host-market context, compromise with host-market institutions seems the most beneficial strategy across the majority of contexts. We further find that existing studies typically follow the tradition of organisational institutionalism (OI; Scott, 2001) or comparative institutionalism (CI; Hall & Soskice, 2001; Whitley, 1999).

Our review makes two main contributions to existing literature. First, we complement previous reviews of how institutions impact MNCs (Xu et al., 2021) or the agency vis-a-vis institutions (Saka-Helmhout, 2020). Our review cuts in between by looking at the interactions between MNCs and host institutions with a focus on organisation-level outcomes, whereas prior work generally concentrates on institution-level implications (Saka-Helmhout, 2020). Our approach unearths previously hidden interaction pathways comprising the host context, interaction strategy and outcomes. For example, we identify that nonconformity with the demands of challenging host-market environments tends to contribute to poorer MNC outcomes, suggesting that adaptation to local requirements is more advisable. Second, we contribute to the literature by identifying blind spots in prior work and by outlining a research agenda. Specifically, we identify opportunities to more incrementally develop existing work, including paying more attention to understudied contexts and leveraging them for theorisation (Teagarden et al., 2018). We also outline a more ambitious agenda for studying the dynamics of interaction strategies, dynamics of their impact, and their microfoundational underpinnings. We argue that combining different strands of institutional theory - specifically OI and CI - offers the necessary tools to pursue this research agenda.

2 Review Methodology

Literature reviews can take various forms. Systematic reviews are considered more rigorous and transparent in terms of literature selection and analysis steps (Tenzer et al., 2017), while narrative reviews are more suitable for theory evaluation (Baumeister & Leary, 1997). This paper combines these two review methods by supplementing a systematic review with a narrative element aimed at critically evaluating and synthesising extant research, thereby leveraging the strengths and overcoming the weaknesses of these approaches.

2.1 Journal Selection

We restricted our search to leading peer-reviewed English-language journals to ensure theoretical and methodological quality and rigour, in line with recommendations in highly cited review studies in business and management (e.g., Pisani, 2009). We drew on these reviews' recommendations and the influential rankings by the Chartered Association of Business Schools, Financial Times and University of Texas-Dallas. This approach yielded 30 sources, including highly ranked journals in management and strategy (e.g., Academy of Management Journal), IB (e.g., Journal of International Business Studies), human resource management and organisational behaviour (e.g., Human Resource Management), marketing (e.g., International Marketing Review) and ethics (e.g., Journal of Business Ethics). We included full-length published articles, including conceptual contributions.

2.2 Review Procedure

Our review procedure is summarised in Fig. 1, which draws on a similar model in Ceipek et al. (2019).

We chose 1991-2022 as the review timeframe because, to the best of our knowledge, the seminal 1991 article by Rosenzweig and Singh was the first to study MNC interactions with host-country institutions in a leading management journal. In combination, this timeframe and the breadth of journals included in our review ensure sufficient scope to draw sound, relevant conclusions.

In selecting articles, we followed state-of-the-art procedures on conducting literature reviews, combining a protocol-driven approach with a snowballing technique (Collien, 2021). The first of four steps was a keyword search in selected journals indexed in EBSCO Host Business Source Premier and/or Web of Science, using the advanced search function and a Boolean search algorithm. Reflecting the multidimensional nature of our focal phenomena, we adopted multiple combinations of keywords including terms referring to MNCs and institutions: MNC, MNE, multinational, institutions, institutional distance, legitimacy, institutional entrepreneurship, institutional complexity, and adaptation. This initial search strategy yielded 489 results.

The second step started with assessing these papers to ascertain their relevance, checking titles, abstracts and (where necessary) full texts. We removed papers that contained relevant keywords but did not address MNCs and/or institutions. Next, we used several criteria to ensure that further paper selection addressed our research aims. We included papers focused on actions of the headquarters (HQ) and units outside MNCs' country of origin, regardless of where the primary influences were located, provided those actions were explicitly undertaken in response to clearly defined host-country institutions. These steps halved our sample.

We also excluded articles dealing with host-country institutions for location choice, entry mode and/or subsidiary ownership strategy (e.g., Chan & Makino, 2007). These studies typically deal with MNCs' response to institutions at the point of entry (e.g., Xie et al., 2017), whereas our review focuses on the ensuing interaction. We retained one paper dealing with subsidiary strategies pursued shortly after entry (Klossek et al., 2012), explicitly drawing on data from MNC subsidiary sources. Finally, we excluded papers conceptualising institutions strictly in terms of national culture (e.g., Zhang et al., 2016).

In the third step, to ensure no relevant papers were overlooked, we scrutinised each journal issue with reference to our review objectives. Relying only on keywords might have led to omission of papers referring to MNCs by their country of origin (e.g., 'Chinese firms') rather than 'foreign' or 'multinational' or using other terminology due to disciplinary differences. This step added under 25 papers (e.g., Fenton-O'Creevy et al., 2008).

Finally, the fourth step extended our search using snowballing. By examining reference lists and citations of papers deemed relevant and applying the same inclusion criteria described above, 10 further papers were added.

Across all steps, we continued to refine our selection by closely reading, analysing and discussing ambiguities (David & Han, 2004). Such discussions made the process less linear, as we constantly scrutinised the sample for logical consistency. Our final selection comprised 176 papers.

2.3 Analysis

Our analysis involved several stages. We first used content analysis to conduct our systematic literature review. Following Mellahi et al. (2016b, p. 145), we employed Microsoft Excel to build an "inductively derived formalized codebook", considered good practice in state-of-the-art literature reviews. We qualitatively analysed our final sample, refining definitions of key themes and identifying sub-items. In doing so, we adopted an abductive approach (Dubois & Gadde, 2002), starting with the 'Antecedents-Phenomenon-Consequences' model to structure the emerging findings.

We analysed 102 conceptual and empirical papers referring to outcomes of such processes for both MNCs and their institutional environment in host countries. For studies documenting multiple categories of interactions, we coded each...