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INTRODUCTION
What drives firm strategy in international business (IB)? What determines the success and failure of firms around the world? These are some of the most fundamental questions confronting the IB field (Peng, 2004a). Traditionally, there are two perspectives that address these two questions. An industry-based view, represented by Porter (1980), argues that conditions within an industry, to a large extent, determine firm strategy and performance. A resource-based view, exemplified by Barney (1991), suggests that it is firm-specific differences that drive strategy and performance. These influential views have been developed primarily in the field of strategic management. While IB and strategy are closely allied fields (Peng, 2006; Ricart, Enright, Ghemawat, Hart, & Khanna, 2004), what are the contributions of IB research that can add to our understanding of the two crucial questions raised earlier?
Insightful as the industry- and resource-based views are, they can be criticized for largely ignoring the formal and informal institutional underpinning that provides the context of competition among industries and firms studied with these lenses (Kogut, 2003). In other words, they assume institutions as "background". This is not surprising, because industry- and resource-based views arise primarily out of research on competition in the United States, in which it may seem reasonable to assume a relatively stable, market-based institutional framework. Once we study competition around the world, it is evident, as shown by decades of IB research, that the world is different. Even among developed economies, there are significant differences in terms of how competition is organized (Hall & Soskice, 2001; Lewin & Kim, 2004; Redding, 2005; Ring, Bigley, D'Aunno, & Khanna, 2005; Whitley, 1994). More recently, as researchers increasingly probe into emerging economies whose institutions differ significantly from those in developed economies, there is increasing appreciation that formal and informal institutions, commonly known as the "rules of the game" (North, 1990), significantly shape the strategy and performance of firms - both domestic and foreign - in emerging economies (Hoskisson, Eden, Lau, & Wright, 2000; Wright, Filatotchev, Hoskisson, & Peng, 2005). One visible piece of evidence of the upsurge of IB strategy research interest in emerging economies is a series of recent high-profile Perspective papers in the pages of this journal: London and Hart (2004), Meyer (2004), Ramamurti (2004), and Ricart...