Strategic Responses to Domestic and Foreign Institutional Pressures

This study investigates how firms respond to domestic institutional constraints and to host country institutional frameworks. A substantial number of firms are active in international business, and yet they remain domestic by staying in their home countries—exporters and outsource service providers come to mind. How these firms react to changes in both domestic and foreign rules of the game, as well as the interactions between these two sets of rules, remains underexplored. Taking advantage of a product recall crisis, this exploratory study probes into how firms in the Chinese toy industry strategically react to the institutional pressures from both home and abroad. Implications for a strategic response framework are discussed.