This study aims to discuss the interaction between exogenous shocks, time and institutional quality. The authors also explore the strategic responses of multinational enterprises (MNEs) to exogenous shocks and how they manage international expansion while considering the quality of their home institutions.
This paper uses a theoretical approach of exogenous shocks, time and institutional quality, proposing that the duration required for an MNE to recover from exogenous shocks is influenced by the home country institutional quality, thereby shaping the relationship between exogenous shocks and time.
This research indicates that previous MNE experience, the learning process and the nature of exogenous shocks (both in terms of type, duration and impact) also significantly influence the response of MNEs. In addition, the authors propose that the home country moderates exogenous shocks for MNEs through channels, including the provision of high institutional quality, country-specific and firm-specific advantages.
The contributions lay in adding to the existing body of knowledge on exogenous shocks by exploring beyond what is considered constant or nondisruptive. This provides valuable insights into the effects of exogenous shocks, and how their negative impacts over time can be alleviated through institutional quality.
This study is unique because it explores the dynamic relationship between exogenous shocks and time, two correlated topics that have not been jointly addressed in the international business literature. In addition, the quality of a country’s institutions helps explain this interaction, demonstrating how the dynamics affect the international strategies of MNEs.
