The role of informal institutions in corporate governance: Brazil, Russia, India, and China compared

By Saul Estrin, Martha Prevezer. 2011

404 citations recorded by the source corpus.

This paper argues that the role of informal institutions as well as formal ones is central to understanding the functioning of corporate governance. We focus on the four largest emerging economies: Brazil, Russia, India, and China—commonly referred to as the BRIC countries. Our analysis is based on the Helmke and Levitsky framework of informal institutions and focuses on two related aspects of corporate governance: firm ownership structures and property rights; and the relationship between firms and external investors. We argue that for China and some states of India, “substitutive” informal institutions, whereby informal institutions substitute for and replace ineffective formal institutions, are critical in creating corporate governance leading to enhanced domestic and foreign investment. In contrast, Russia is characterized by “competing” informal institutions whereby various informal mechanisms of corporate governance associated with corruption and clientelism undermine the functioning of reasonably well set-out formal institutions relating to shareholder rights and relations with investors. Finally Brazil is characterized by “accommodating” informal institutions which get around the effectively enforced but restrictive formal institutions and reconcile varying objectives that are held between actors in formal and informal institutions.

Subfields: Accounting, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/dc0d019f3cfd78c9100aef1eb80a8e6b27d54826

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Citations in the corpus

Theories of the (state-owned) firm (2016, neutral): “The institution-based view distinguishes between formal institutions and informal institutions (Estrin & Prevezer, 2011; Holmes, Miller, Hitt, & Salmador, 2013; North, 1990; Peng, 2003).”
Institutional polycentrism, entrepreneurs' social networks, and new venture growth (2013, background): “Networks supplement or supplant weak and inefficient rules and prescriptions when the goals, intentions, and expectations of formal institutional actors and entrepreneurs are incompatible and conflicting (Estrin & Prevezer, 2011).”
Home country institutions and the internationalization of state owned enterprises: A cross-country analysis (2016, background): “…the extent of agency conflict and the efficiency of governance structures and thus the mechanisms by which owners can influence the activities of firms (Aguilera & Jackson, 2003; Estrin & Prevezer, 2011; Filatotchev, Jackson & Nakajima, 2013; Wiseman, Cuervas-Rodgriguez & Gomez-Mejia, 2012).”
Institutional asymmetry: How formal and informal institutions affect entrepreneurship in Bulgaria (2015, background): “Many respondents commented on the weakly enforced and/or corrupt juridical and regulatory institutions which maintain if not extend the institutional asymmetry; formal institutional changes are not enforced and so are ineffective (Estrin and Prevezer, 2011).”
Institutional Entrepreneurship in the Informal Economy: China's Shan-Zhai Mobile Phones (2014, background): “…significant for China and other transitional economies, which are characterized by ambiguous jurisdiction and conflicting interests among different levels of government, as well as by weak ownership protection, poor enforcement, and arbitrary corruption (Estrin and Prevezer, 2011; Tsai, 2006).”
Institutional environment, innovation capacity and firm performance in Russia (2013, background): “For instance, corporate raids and property seizures, falsification of legal documents to justify business takeovers by independent raiders, lack of protection of minority shareholders’ and creditors’ rights, and gaining access to personal information about entrepreneurs in ways that are considered u”
Human Capital and CEO Compensation during Institutional Transitions (2015, neutral): “market-oriented aspects, future work may probe into the impact of informal institutions such as values and norms in shaping CEO compensation (Estrin and Prevezer, 2011; Sauerwald and Peng, 2013).”
Corporate governance and Asian companies (2011, methodology): “In this regard, Nakamura’s argument is consistent with an inference that can be drawn from the discussion in Estrin and Prevezer (2011).”
Offshoring innovation to emerging markets: Organizational control and informal institutional distance (2014, background): “First, unlike formal institutions, the informal institutions construct has not been rigorously conceptualized (Estrin & Prevezer, 2011).”
Barriers and public policies affecting the international expansion of Latin American SMEs: Evidence from Brazil, Colombia, and Peru (2016, background): “…three main areas: (i) information problems: comprehensive, reliable, and objective information to make decisions is not widely available (Estrin & Prevezer, 2011); (ii) misguided regulations: political goals may take priority over economic ef ﬁ ciency, reducing thus the chances to take full…”