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Journal of International Business Studies,

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Peng, M.W., Wang, D.Y.L. & Jiang, Y. (2008) â??An institution-based view of international business strategy: A focus on emerging economies?, Journal of International Business Studies, 39 (5), July/August, pp. 920-936.

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An institution based view of global business involves paying attention to formal and
informal institutions, or rules of doing business. According to Peng, Wang & Yi Jian (2008),
doing business in both established and emerging global markets is increasingly focused on
playing by the rules. The challenge is in learning what those rules are, for the various
economies. Many firms fail to consider the views, beliefs and needs of customers in foreign
markets, when moving into the global arena. The authors use an example of activism in
India, against what they considered tainted Coca Cola and Pepsi Co. products. Additionally,
the concept of a free marketing and pricing strategies has confused Chinese manufacturers,
who fail to understand that their low cost strategy may be considered illegal or unfair in
the United States (Peng et al, 2008).

While the formal institutions of global markets consist of regulations within each
country, rather than just those of international trade agreements or world trade organizations,
Informal institutions can be just as important and may even take over, where formal
institutions are lacking. Rugman (2008) stresses the fact that firms must understand the rules
and those who are successful globally have been able to identify and respond to those rules,
whatever they may be. According to Rugman, the institution based view of global business
has gone as far as to take the place of market dynamics, in terms of importance in doing
business globally.

Market trends are important, but political and cultural views and the rules that come
about as a ...

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