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Research in international management (IM) has long recognized the importance of understanding the institutional differences between countries. Indeed, ‘a basic premise of much of IM research has been that firms are embedded in country-specific institutional arrangements’ (Busenitz et al., 2000: 994). One important strand of this literature focuses on institutional distance: ‘the difference/similarity between the regulatory, cognitive, and normative institutions of . . . two countries’ (Kostova and Zaheer, 1999: 71). However, the version of institutional theory that this work draws upon is dated and narrow, and this limits the usefulness of the concept. In this essay, we argue for a new conceptualization of institutional distance based on recent developments in new institutional theory (see Greenwood et al., 2008). More specifically, we argue that institutional distance should be reconceptualized in three ways. First, we argue that institutionalization is a matter of degree and that low levels of institutionalization increase institutional distance. Current conceptualizations of institutional distance fail to include this effect. Second, we argue that including the concept of organizational field allows for a multi-level analysis that incorporates subnational, national and supranational institutional differences resulting in a better measurement. Finally, we introduce the concept of institutional entrepreneurship to discussions of institutional distance. This provides an exciting new opportunity for theorizing about the activities of firms involved in international activity. STRATEGIC ORGANIZATION Vol 7(3): 339–348 DOI: 10.1177/1476127009337439 © The Author(s), 2009 Reprints and Permissions: http://www.sagepub.co.uk/journalsPermissions.nav http://so.sagepub.com
Phillips et al. (Sat,) studied this question.