Institutions, industries and entrepreneurial versus advantage-based strategies: how complex, nested environments affect strategic choice

With primary and secondary data on 658 firms from 17 countries across three continents, we examine the combined influence of country-level institutions on industry attributes and in turn their effects on the choice of a defensive advantage-based strategy and an entrepreneurial strategy. We find that strong and efficient institutions constrain both dynamism and munificence in industries. In turn, industry dynamism has a negative effect on both entrepreneurial and advantage-based strategies. However, firms having strong relational capital with important stakeholders can better navigate these uncertain environments to employ both strategies with increasing strength. Alternatively, in more munificent environments, firms are less likely to employ advantage-based strategies and more likely to employ entrepreneurial strategies. This study demonstrates the environmental conditions under which firms are more-or-less likely to employ entrepreneurial strategies and defensive advantage-based strategies.

Automated summary

This study examines the influence of country-level institutions on industry attributes and their effects on firm strategy choices. Strong and efficient institutions are found to constrain industry dynamism and munificence, which in turn affect the adoption of entrepreneurial and advantage-based strategies. Firms with strong relational capital are better able to navigate uncertain environments and employ both strategies, while in more munificent environments, firms are more likely to employ entrepreneurial strategies over advantage-based strategies.