Understanding Asian business strategy: Modeling institution-based legitimacy-embedded efficiency

a r t i c l e i n f o To understand the unique aspects of Asian business practice, we propose a conceptual framework of institution-based, legitimacy-embedded efficiency. We underscore the institutional foundations of Asian business practice and propose that gaining legitimacy takes priority in order to attain the efficiency that follows from legitimacy in Asian business practice. We then highlight several fundamental, philosophic principles that define the meaning of legitimacy and ways to achieve legitimacy in Asian societies. We also provide a brief summary of each paper in this special issue and then proceed to pinpoint desirable directions for further research in light of our conceptual framework. With the rapid growth of Asian economies, interest is growing among executives seeking to acquire in-depth insight into cultural and institutional aspects of Asian business practices. In most Asian countries, institutions are often informal, weakly formalized, or even non-existent (e.g., in much of rural India) (Khanna & Palepu, 2000). Although many Asian countries are undergoing institutional transitions toward legalized societies and market-driven economies, which entail dramatic changes in people's values and lifestyles (Peng, Wang, & Jiang, 2008), informal institutions such as cultural norms and customs remain potent in affecting Asian business practice, and the ways in which they affect business remain essentially uncharted. As such, scholars are calling for more novel theories that shed light on management and marketing strategy from an Asian perspective (Fam, Yang, & Hyman 2009; Yang & Wang, 2011). Asian institutional environments (e.g., regulatory, normative, and cognitive institutions), along with industrial organizational structures and firm factors are exerting substantial impacts on firm strategy and performance special issue devotes much of its attention to understanding Asian business practice and, in turn, contributing to Asian theories of strategic management and marketing. Our call for papers has generated much interest from all over the world, as evidenced by 125 articles, representing overwhelming numbers of submissions for a single special issue. In this introduction, we first propose a conceptual framework of institution-based, legitimacy-embedded efficiency to provide a concise, yet useful, scheme in understanding management and marketing strategy in Asia. We underscore the institutional underpinnings of business strategies which enhance legitimacy and efficiency. We then highlight several fundamental, philosophical principles related to business strategy , which provide profound understanding of how informal institutions shape the strategies that firms employ and the actions that managers take in most Asian countries. We give a …