Competition, corruption, and corporate governance in transition economies

With three essays, this dissertation explores firm strategic choices and their organizational outcomes in transition economies. Relying on the awareness-motivation-capability framework, the first essay (chapter 2) explores the competitive interactions between multinational firms and their domestic counterparts. Specifically, this essay focuses on three hypothetical periods over which the two types of firms develop certain capabilities that shape their strategic choices and eventually determine their performance outcomes. Overall, this essay contributes to the competitive dynamics literature by systematically modelling the competitive interaction between multinational and domestic firms in transition economies with a longitudinal perspective. The second essay (chapter 3) explores the impact of bribery on firm performance, and more specifically, it asks how this impact changes based on the institutional effectiveness in a country. Following the "grease in the wheels" perspective, we first argue that bribes may help firm performance in relatively weak institutional settings. Then we extend our arguments by highlighting that the positive effect of bribery on firm performance decreases as institutions become more effective. Overall, this essay contributes to the literature on corruption by underscoring the importance of institutional effectiveness on the link between firm level bribery and firm performance. Finally, the third essay (chapter 4) explores how agency theory-prescribed internal monitoring and alignment mechanisms affect firm performance in China. We investigate how these effects change as Chinese market institutions and financial development evolve over time. Our findings are consistent with the notion of partial, rather than full-fledged, convergence of corporate governance mechanisms in China. In the longer debate on whether Western theories can be applied in China, our results find that agency theory is more strongly supported in China than elsewhere. Overall, this essay contributes to the corporate governance literature by providing the first meta-analysis for monitoring and alignment mechanisms and their relationships to firm performance in China and also by showing that these mechanisms can help firm outcomes, especially when accompanied by improvements in market institutions. Overall, this dissertation shows that external factors such as competitive dynamics and institutional differences matter for the link between firm strategic choices and firm level outcomes, and more importantly, it shows that these relationships are dynamic in nature.