The Impact of Institutions on Economic Growth in Central and Eastern Europe

Abstract

Within the international business literature, the importance of locational differences has recently come to the fore in many studies (Dunning, 2009; Meyer et al., 2011; Rugman et al., 2011). However, in contrast to studies that are underpinned by a more comparative sociological perspective, many of these analyses within the international business literature adopt a relatively narrow definition of ‘institutions’ when examining the consequences for commercial activities of any locational differences. For instance, within the international business literature, many studies focus on a relatively narrow range of formal, regulatory institutions that shape arm’s length contracting within markets (Khanna and Rivkin, 2001; Meyer, 2001; Meyer et al., 2011). This definition of institutions is favoured over broader ones that can encompass a greater range of regulation-based ones as well as more informal or, indeed, para-public institutions (Jackson and Deeg, 2008). A corollary of this conceptualization of ‘institutions’ is that several prominent studies in the international business literature refer to ‘institutional voids’ (Khanna and Palepu, 2006; Kim et al., 2010; Tan and Meyer, 2010; compare, Peng et al., 2008). By this, such analysts often mean the lack of strong legal rules that can be enforced, for example, to uphold the terms of a contract (Khanna and Palepu, 2006, p. 62; Tan and Meyer, 2010).