Abstract
There have been calls to incorporate comparative institutional li terature, such as the Varieties of Capitalism (VoC) (Hall and Soskice, 2001) and National Business Systems (NBS) (Whitley, 1999), into research in international business, including the investigation of FDI (Mudambi and Navarra, 2002; Redding, 2005). Outward FDI is considered in terms of such factors as political risk, market size, and cultural and geographical proximity (Buckley et al., 2007; Butler and Domingo, 1998). There has, however, been limited consideration of the role of institutional factors for outward FDI trends, especially in the light of rapid changes in the external environment. Consensus-based institutional systems in developed countries may lead to incentives for multinational corporations (MNCs) to escape home countries (Witt and Lewin, 2007). As global conditions change MNCs requirements in their home base need adjusting to maintain competitive advantages. This issue connects to the concept of adaptive efficiency of institutional systems. Adaptive efficiency is the ability of institutions to evolve to adjust to new conditions such that transaction costs and risks are low enough to permit firms to successfully respond to changing conditions (North, 1990a, 1990b). In consensual institutional systems, adjustments of institutions can be slow, leading to increases in outward FDI as MNCs seek to avoid loss of competitive edge in their home base. In such cases the institutional system has ineffective adaptive efficiency leading to institutional systems that hinders the necessary strategic adjustment process of MNCs to external shocks.
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© 2013 Heinz-Josef Tüselmann, Frank McDonald, Martin T. Bohl, Svitlana Voronkova and Paul Windrum
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Tüselmann, HJ., McDonald, F., Bohl, M.T., Voronkova, S., Windrum, P. (2013). Outward Foreign Direct Investment and the Adaptive Efficiency of the German Institutional System. In: Cook, G., Johns, J. (eds) The Changing Geography of International Business. The Academy of International Business. Palgrave Macmillan, London. https://doi.org/10.1057/9781137277503_3
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